GSA Blog

Being good stewards of taxpayer dollars through our Occupancy Agreements

GSA’s Public Buildings Service (PBS) is charged with driving the best real estate value for the government and the American people. To that end, PBS continues to work with tenant agencies to align strategies, plans, and resources that will result in a right-sized real estate portfolio and deliver more flexible and modern workplaces for the federal workforce.

These efforts build on GSA’s successful work over the years to optimize the federal government’s real estate portfolio. Because real estate needs change over time, GSA continually reviews its policies to ensure they reflect current opportunities to better align with agencies’ missions, drive efficiency and achieve taxpayer savings.

Today - with about half of GSA’s leases, totaling approximately 20 percent GSA’s total square footage, expiring in the next five years and with tenant agency demand for leased space in flux and trending toward decreased space needs - GSA has issued new guidance for Occupancy Agreements (OA) in leased space, consistent with our Pricing Policy. OAs are the agreements between GSA and a tenant agency housed in GSA leased space. The goal of this change is to reduce the government’s financial risk associated with unused lease space under GSA’s custody and control, and help to ensure that the government is only paying for the space it needs. Specifically, for new and continuing OAs for leased space, OAs will be “non-cancellable” for the initial term of the lease (also known as “firm term”). This does not apply to lease option years.

Why take this approach?

In the past, when there was high demand from tenant agencies for leased space, GSA would enter into a lease with a property owner for a defined term, and in turn, GSA entered into an OA with a tenant agency, often giving agencies the right to cancel their OA with 120-days notice to GSA without impacting the underlying lease. The logic behind offering a “cancellable OA” was that there was enough federal demand for real estate that GSA could backfill the leased space with another tenant agency, with relatively low risk exposure to GSA to meet its lease obligations.

However, even before the pandemic, many agencies were consolidating space in an effort to save money, activities which have only increased post-pandemic. Right-sizing the footprint is good for the federal government and GSA is actively supporting tenant agencies in their real estate optimization plans. 

In response, GSA is putting in place appropriate and various measures to assess and align the government’s real estate needs prior to entering into a new lease. All OAs associated with new occupancies in leased space, regardless of the lease type (e.g., new lease, new replacing lease, new lease construction superseding and succeeding leases), will be non-cancellable. Existing OAs entered into prior to April 18, 2023, remain as executed. This approach will be reevaluated at the end of FY24.

This approach is driving more collaboration between GSA and tenant agencies during development of new lease requirements, as well as aligning agency decisions with the true financial cost to the taxpayer, not to mention avoiding procurement of unnecessary leased space.

All of these are the intended outcomes GSA seeks to promote. This guidance ensures that tenant agencies are thoughtful about how much space they need and commit for the duration of the lease, which creates real estate cost discipline. Many agencies requesting new leased space do so knowing that they have a long-term real estate need, in which case GSA will continue to seek lease terms that drive the most favorable prices. In the case of other agencies that do not have that same clarity about their long-term space needs, GSA is able to offer available space in federally-owned buildings, excess space in existing long-term leases, or procure a new lease with a term appropriate to the tenant agency’s needs.

In short, with more than 50% of its leased portfolio expiring in the next 5 years, and with agency demand for space shifting in ways that we cannot fully predict at this time, GSA is putting into place interim guidance to best manage the real estate cost risk to the government during this time of change.