The federal government’s real estate portfolio faces a significant challenge as post-pandemic occupancy rates drop to historic lows, creating opportunities for taxpayer savings through strategic asset disposal. Recent analysis reveals that some federal buildings in Washington D.C. are operating at occupancy rates as low as 12%, with one facility costing taxpayers $180,000 annually per occupied seat, eighteen times the cost of comparable commercial office space.
The Public Buildings Reform Board, an independent federal agency tasked with identifying underutilized government properties, has emerged as a key player in addressing this issue. Created through the Federal Asset Sales and Transfer Act of 2016, the board was initially given a six-year mandate to evaluate the government’s vast real estate portfolio and recommend properties for disposal.
“Congress created this board because they wanted an independent look at how the government manages its underutilized real property,” explains Paul Walden, Executive Director of the Public Buildings Reform Board. “They thought there was this huge portfolio of underutilized real property, and they wanted to see if they could have an independent board come in and look at the portfolio and make recommendations on disposal.”
The Scale of Federal Real Estate Underutilization
The federal government owns over 200,000 assets across the country, with the General Services Administration (GSA) managing the majority of commercial office buildings. However, reliable occupancy data has been difficult to obtain through traditional government reporting systems.
To address this data gap, the board contracted with cell phone data analytics companies to track anonymous occupancy patterns. The results were striking: federal headquarters buildings in Washington D.C. averaged just 12% occupancy during the first nine months of 2023.
“We weren’t able to get really reliable occupancy data for these buildings through the Federal Real Property Data inventory system,” Walden notes. “The reliability of that system is questionable at best. So we used publicly available cell phone data: anonymous, summary data that showed on average, in DC, these buildings were occupied less than 20%.”
This data collection method filters out brief visits, focusing on individuals who remain in buildings for full workdays. The findings revealed a stark contrast between government facility costs and commercial market rates, with some federal buildings costing $180,000 per year per occupied seat compared to $10,000 for Class A commercial space on K Street.
Legislative Extension and Expanded Authority
The board’s initial six-year mandate was set to expire in May 2024, but Congress recognized the ongoing need for reform. In January 2024, the Water Resources Development Act extended the board’s authority through December 2026 and authorized an additional round of disposal recommendations.
“I think Congress saw our interim report from March 2024 and realized there’s still more work to be done,” Walden explains. “We showed them this vast amount of underutilized office space, especially in DC, and the potential savings associated with disposing of these buildings.”
The extension came after the board demonstrated tangible results from its initial recommendations. The first round of disposal recommendations, submitted in 2020, has generated $193 million in sales proceeds from ten completed transactions, with two additional properties expected to yield another $100-300 million.
Strategic Asset Selection Criteria
Given the massive scope of the federal portfolio, the board focuses on properties that offer the greatest potential return on investment. Selection criteria include buildings with high deferred maintenance costs, significant vacancy rates, and locations in stronger real estate markets.
“We try to focus on buildings that have a high amount of deferred maintenance, because we know GSA will never get the funding to address that, buildings that seem to have a high level of vacancy, and buildings that are in sort of a stronger real estate market,” Walden explains.
The board’s financial analysis extends beyond simple market value calculations. Each recommendation includes a 30-year net present value assessment that factors in both potential sale proceeds and cost avoidance from eliminating ongoing maintenance and operational expenses.
The second round of recommendations, submitted recently, projects potential savings of $5.4 billion over 30 years. This figure encompasses both the market value of disposed properties and the present value of avoided costs over three decades.
Disposal Process Evolution
The actual sale of recommended properties falls under GSA’s jurisdiction, and the disposal process has changed since the board’s inception. Early sales used online auction platforms, but complex properties with zoning issues or historic preservation requirements often struggled to attract buyers this way. For example, a property in Laguna Niguel, California, listed on the National Register of Historic Places, received zero bids at auction due to preservation constraints; only after GSA established conditions allowing potential demolition did the property draw interest.
“That building could have sold sooner had they used a broker in the first place,”Walden observes. “We had advised GSA to use a broker for these complex properties with zoning issues and historic preservation requirements.”
Recent developments suggest improved disposal processes ahead. GSA has awarded a blanket purchase authorization to major commercial real estate firms, providing access to comprehensive marketing and brokerage services. This shift toward professional real estate services could accelerate future disposals and improve sale outcomes.
Market Dynamics and Future Opportunities
The commercial office market’s broader challenges affect federal property disposals, with major markets experiencing vacancy rates exceeding 20-30%. However, the federal government’s unique position—owning properties outright rather than leasing, creates opportunities for strategic consolidation and cost reduction.
Current market dynamics include the return-to-office mandate for federal employees, ongoing agency downsizing, and proposed legislation to relocate portions of agencies outside Washington D.C. These factors create uncertainty about long-term occupancy patterns.
“The dust has not yet settled on what the occupancy figure looks like for DC,” Walden notes. “Until that settles, we don’t really have an idea yet what the total opportunity is.”
Recent legislation requiring agencies to collect daily occupancy data through the USE IT Act aims to provide better insights into space utilization. This data collection is still in early stages, and validation of accuracy remains ongoing.
Looking Forward
The board faces a December 2026 sunset date, raising questions about long-term federal real estate reform efforts. With hundreds of potentially disposable buildings remaining unanalyzed due to resource constraints, the scope of opportunity extends well beyond the board’s current capacity.
“There’s potentially hundreds of buildings that probably should be disposed of,” Walden acknowledges. “The big key is, if you can identify them, because it takes money to save money. Most of these buildings, you’re going to have to move agencies out, there’s probably some environmental remediation.”
The board’s work has established precedents for federal real estate reform, demonstrating both the potential for significant taxpayer savings and the complexity of disposing of government assets. As occupancy patterns change in the post-pandemic period, lessons from this independent review may inform future approaches to federal property management.
For real estate professionals and investors, the board’s recommendations represent a unique pipeline of government assets entering the market. While each property carries specific challenges related to zoning, environmental conditions, or historic preservation, the potential for substantial cost savings suggests continued congressional interest in federal real estate reform beyond the current board’s mandate.
The board welcomes input from real estate professionals who identify potentially underutilized federal properties in their markets, recognizing that local market knowledge can enhance the evaluation process for future disposal recommendations.
