Feds to feel the squeeze as cubicles and offices shrink

Thursday - 7/31/2014, 4:28am EDT

Jason Miller, Executive Editor, Federal News Radio

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By Ariel Levin-Waldman & Jason Miller
Federal News Radio

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.