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General Paul J. Kern,
U.S. Army (ret.)

Commercial real estate developers and owners in the national capital region and beyond have long counted on the Federal government’s need for leased and build-to-suit office space as a business mainstay. So have architects, construction firms, office equipment suppliers, and many others in the industry. But this reliable revenue stream is about to slow to a trickle, according to speakers at the ULI Washington Real Estate Trends conference on April 17.

Speakers representing the Department of Defense (DoD), the General Services Administration (GSA), and the Transportation Security Administration (TSA) all said that their agencies are under pressure to downsize their space needs and use existing government buildings before considering the use of privately owned space. Agencies across the board are reducing the number of square feet required for each employee through increasing use of technology, teleworking, and other strategies.

General Paul. J. Kern, United States Army (retired), noted that the federal government’s proposed 2013 budget would cut DoD spending by nearly $500 billion over the next ten years– an amount equal to the entire budget of Germany over the same period. If Congress does not agree on a budget by the end of the current fiscal year, however, automatic budget cuts called “sequestration,” part of the Budget Control Act of 2011, could double that amount.

How will this affect DoD’s demand for office space? Kern explained that the Base Realignment and Closure Act (BRAC) shuttered a lot of DoD facilities but also resulted in construction of new ones, in part to meet post-9/11 security requirements. This temporary boost in military construction is coming to an end, he pointed out. Anticipated reduction in force across the Armed Forces, possible sequestration, and another round of BRAC closures as proposed by the Secretary of Defense could all combine to put pressure on the economy—with many former soldiers entering the civilian workforce—as well as military readiness.

Also discussing DoD’s space needs was Bradley Provancha of the Washington Headquarters Service, which manages DoD’s space needs in the national capital region. He reiterated that the DoD already has completed major post-9/11 and BRAC-related adjustments, including the 1.8 million square feet (167,225 sq m) Mark Center which houses more than 6,400 defense workers in Alexandria, Virginia; the new Defense Advanced Research Projects Agency (DARPA) headquarters at Founders Square in Arlington, Virginia; and new northern Virginia buildings totaling over 1 million square feet (92,903 sq m) for the Defense Intelligence Agency and Defense Health Headquarters. Future trends, he told the ULI audience, include incorporating alternative workplace solutions like teleworking and seeking government-owned solutions for space requirements.

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Photo by: David B. Gleason, flickr user
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Similarly, the GSA is trying to do more with less and maximize use of government-owned facilities, said Elaine Clancy, director of leasing for GSA’s national capital region. “We are helping agencies creatively shrink their space,” she said, using as an example the old GSA national headquarters building in Washington, which used to house 2,500 workers but will provide space for 4,500 employees after completion of a gut renovation. Teleworking and replacing desktop computers with laptops are strategies that are helping to reduce employees’ space needs. They are not just working at home, Clancy noted. Many work in the field and onsite at agencies that GSA serves.

TSA, which grew from zero to some 62,000 employees in just ten years, is perhaps the most aggressive agency in reducing employees’ space needs. “We use only 168 square feet (15.6 sq m) per person, and plan to bring this down to 125-130 square feet (11.6-12 sq m) in the near future,” said TSA’s John Holloway. The agency plans to achieve this goal, he explained, through teleworking and technology (such as use of an Intranet) that reduces paperwork, as well as the fact that TSA’s approximately 45,000 airport screeners do not work in offices.