Smaller office spaces loom in agencies’ futures as they move full speed ahead to reduce the amount of real estate they hold.
Executives from six of the largest agencies told House Transportation and Infrastructure Subcommittee on Economic Development, Public Buildings, and Emergency Management members Wednesday how they plan to reduce the average square foot per employee by as much as 50 percent.
“After consolidating into the Humphrey building, the office of the chief information officer’s utilization rate will be reduced from 207 square feet per person to 103 square feet per person,” said E.J. Holland, assistant secretary for administration, Department of Health and Human Service.
The general goal for all HHS offices is 170 square feet per person.
The departments of Defense, Justice, Homeland Security and State, and the Social Security Administration detailed similar plans.
Jeffery Orner, the DHS chief readiness support officer, said new DHS offices would have a utilization rate on average of 150 square feet per person, down from an average of 200. The General Services Administration set a goal of 130 square feet down from 184.
State, DoD and SSA set an average of no more than 200 square feet per employee, while Justice is on the low end with an average of 130 square feet per employee.
Officials from all six agencies say these figures are just averages and there are some employees who will need more space and others who will get less space.
“GSA is focused on improving utilization throughout our portfolio, including in our leased space. We hold more than 375 million square feet, half of which is distributed among 9,000 leases across the country,” said Norman Dong, commissioner of the GSA’s Public Building Service. “We are working with federal agencies to improve utilization throughout our owned and leased portfolios. As a result, we’ve saved millions of dollars for our federal partners and the American taxpayer.”
Dong said in 2014 prospective level leases, GSA and its agency partners proposed a 13 percent square footage reduction, going from 4.3 million to 3.7 million square feet.
“We are doing this by helping federal agencies adopt new workplace arrangements and adopt mobile strategies, so more people can work in less space,” he said.
Clock is ticking on leased space
The effort to reduce office space is part of the Obama administration’s Freeze the Footprint initiative started in March 2013. The White House reported earlier this summer that agencies have exceeded the initiative’s benchmarks for downsizing properties.
This was the second hearing on agency office space in two days and second one by this committee over the last year. Lawmakers at Wednesday’s hearing wanted assurances that GSA and customer agencies will make better decisions as about 100 million square feet of leased space—which accounts for about half of GSA’s leased inventory—expires over the next five years.
Committee members expressed concern over the habit of agencies entering into short term leases, which legislators say costs the government 20 percent more than leases of 10 years or more.
“Low interest rates: financing costs are near historic lows,” Rep. Lou Barletta (R-Pa.), chairman of the subcommittee, said. “Literally billions of dollars of cheap and abundant capital are sitting on the sidelines waiting to help reshape the government’s leased inventory. A buyer’s market: vacancy rates are high and rental rates are low in almost every market GSA has a presence.”
Barletta said if the agencies at the hearing were to cut their lease costs by 10 percent through decreased office space and better lease rates, the government would save $3 billion over the next decade.
Barletta said he’s worried that agencies will miss this opportunity so he said he may propose an expediting leasing initiative.
“I am open to considering a pilot program for a limited amount of time that would simplify the leasing process and give you greater flexibility to cover your up- front costs,” he said. “The leases would need to have good utilization rates, be long term and competitive, but in exchange you get a fast track process.”
St. Es back on track?
DHS is at the top of the list of agencies needing to consolidate.
Almost half of DHS’ office building leases are set to expire over the next five years, more than a quarter of their total building portfolio. Its leases account for 82 percent of DHS’ real estate outlay, 56 million square feet and $1.7 billion. Orner said these expiring leases are an ideal opportunity for consolidation and economy.
Orner said the agency’s 2015 work plan will focus on real estate reduction and will include office compression and consolidation. He said there will be a modest reduction in DHS office footprint in the short term, but the reduction in space per employee will result in significant footprint reductions in the future.
Orner said DHS expects to reduce office space in the next year by moving more employees of the Coast Guard into the St. Elizbeths complex thanks to the new space standards of 150 square feet per employee.
“It’s my estimate we can put up to an additional 1,000 people in the Coast Guards headquarters building,” he said. “The Coast Guard has various offices and leased space in Arlington, [Va.]. Our plan is to move all of those people as those leases expire into the new Coast Guard headquarters building.”
Orner said that consolidation would save the Coast Guard about $7 million a year in rent, and there may even be room for other DHS components at St. Es.
Dong said FEMA has increased the utilization of its headquarters building in Washington as well. He said they closed the number of leases they held in the Washington metro area.
Dong said GSA asked Congress for about $58 million in 2015 to complete the infrastructure needed to full occupy the center building complex and move more employees to St. Elizabeths.
Federal Triangle South bill
DoD also predicted a 20 percent reduction of its leased space in the national capital region over the next five years. This is in addition to the reductions achieved from 2005 to 2012 under the Base Realignment and Closure (BRAC) process, which net a 3.4 million square foot reduction.
Despite agencies’ progress, Rep. Eleanor Holmes Norton (D-D.C.) said GSA had not gone far enough in developing properties in the Federal Triangle South area. GSA announced in April it would swap two federally-owned properties: a GSA regional office building and the Cotton Annex, for construction services for its headquarters building and for DHS St. Es project.
Holmes Norton said she introduced a bill earlier this week to force GSA to include all parcels of land in the Federal Triangle South complex instead of just two buildings.
“I am going to press very hard for Congress to pass the bill to develop the entire parcel that I introduced this week,” said Holmes Norton.
Ariel Levin-Waldman is an intern with Federal News Radio