After proposed lease contraction of 11% from 2013-2016, GSA prospectuses issued for 2017-2019 saw just a 4% reduction

The “Freeze-the-Footprint” and “Reduce-the-Footprint” presidential memorandums in 2013 and 2015, respectively, drove government agencies to optimize their footprint by shedding excess space.

November 06, 2018
  • The “Freeze-the-Footprint” and “Reduce-the-Footprint” presidential memorandums in 2013 and 2015, respectively, drove government agencies to optimize their footprint by shedding excess space. From fiscal year (FY) 2013 through FY 2016, agencies proposed an average annual lease reduction of 11.4% for Metro DC federal lease prospectuses. Those initiatives helped contribute to 8.8 million s.f. of regional office occupancy losses during that period.
  • However, the trend appears to be evolving. From FY 2017 through the first month of FY 2019, GSA prospectuses have proposed only a 4% average reduction. With this evolution, the next frontier for GSA’s cost-savings endeavor could include decreasing costly short-term extensions signing and exploring additional locations where they currently do not have a sizeable footprint.

Longer-term leases:

  • The proposed reductions in FY 2013-2016 led to short-term renewals, extensions and lease holdover as GSA sought new long-term locations for its tenants. As a result, nearly 50% of active GSA leases are set to expire within five years, creating an administrative burden for GSA. Short-term leases also tend to be extremely costly, averaging a 20% premium on face rates compared to long-term leases, with those short-term leases garnering minimal concessions from landlords. However, a reversal is underway. The average new lease term in FY 2018 was 18 months longer than in FY 2013, and all 2018-2019 prospectuses issued for Metro DC have requested authority to execute 20-year leases.

Migration to cheaper submarkets:

  • Washington, DC: Rising rents in the core have shifted agencies to emerging submarkets like NoMa or Southwest that can meet the $50 p.s.f. prospectus cap. However, even these locations are becoming unfavorable for a federal tenant. Driven by an increase in private-sector demand, only five blocks > 50,000 s.f. with pricing sub-$50 p.s.f. FS are available across Southwest, NoMA and the Ballpark combined. Private-sector demand is also pushing new construction pricing to $60 p.s.f. in these submarkets, and few developers across the District are likely to consider accommodating the cap.
  • Northern VA: The $39 p.s.f. cap is increasingly challenging, particularly for Metro-served requirements. Agencies are priced out of blocks > 50,000 s.f. in the RB Corridor, and sub-$39 p.s.f. Class B&C options are limited elsewhere, with four inside the Beltway (3 in Crystal City, 1 in Eisenhower Avenue) and three outside the Beltway (2 in Tysons, 1 in Reston). As private-sector demand continues to favor Metro-served locations in the years ahead, pricing will follow, making it increasingly difficult for GSA to find options that accommodate the prospectus cap, particularly new construction. The next wave of development along Metro is expected to range from low-$50s p.s.f. in Herndon to the upper-$50s/low-$60s p.s.f. in Tysons, to upper $60s p.s.f. in the RB Corridor. 
  • Suburban MD: Similar to Northern VA, federal tenants are increasingly priced out of urban, Metro-served submarkets. Only four existing blocks > 50,000 s.f. are available across the more urbanized Bethesda CBD, Chevy Chase and Silver Spring, with Silver Spring the only location below the $35 p.s.f. cap. By contrast, suburban submarkets offer a number of options for GSA tenants in Montgomery County, but the opportunity for GSA is becoming increasingly limited to suburban off-Metro product, product farther north on the Red Line and B product with greater distances to the Metro on Rockville Pike. On the other end, Prince George’s County has 16 available blocks > 50,000 s.f., with pricing in the low-$20s p.s.f.


As pricing continues to evolve, each jurisdiction offers opportunities for GSA as it looks to achieve cost-savings in the years ahead. In the District, government tenants may need to shift to more remote or pioneering non-office locations, such as east of the river, or reevaluate the cap. In Northern VA and Suburban MD, with pricing on-Metro expected to continue climbing, particularly in more urban pockets, GSA tenants may need to relax certain transit requirements or shift to pioneering markets where they have historically not moved in mass.

Source: JLL Research,


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