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Improved long term leases provide value for customers and taxpayers

Editor's Note: As 2016 draws to a close, we are featuring some of our most popular GSA Blogs. This week we are counting down the Top 5 Public Buildings Service (PBS) Blogs.

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GSA’s mission is to provide the best value in real estate to government and to the American people. We currently manage an inventory of more than 374 million square feet of space. Approximately half of this is leased space, comprising more than 8,302 leases and 190.8 million rentable square feet across the country.

Our goal is to provide cost-effective real estate solutions for partner agencies that allow them to achieve their mission. Sometimes that means building a new building or consolidating agencies in existing owned space. But often that means going to the market and soliciting for a lease. When we do so, we seek ways to maximize competition and reduce costs so we can get the best deal in the marketplace. One of the most effective ways we can do that is by soliciting leases for longer periods of time where appropriate. A longer term on a lease often results in lower rates for the government. It also means that the cost to make the space occupiable (furniture, IT, etc.), partially contained within the cost of the lease and partially borne by partner agencies, is maximized since that investment is able to be used for a longer period of time. Conversely, short-term leases can result in higher rates, since those upfront costs may be built into the offers; it also means an agency may need to pay those build-out costs again in a short period of time if a future competitive process results in an agency moving.

For these reasons, GSA has been working hard with partner agencies to identify requests where we can go out to the market and ask for longer terms.

Our efforts are showing results. In fiscal year 2016, we realized increases in both the average firm term and average full term of the leases effective when compared to leases in 2015.  24 percent of  leases executed in FY16 had a firm-term of ten years or more; this is a four percent improvement from 2015. Leases with a firm term of 15 years or more also increased in 2016. GSA will continue to pursue opportunities to reduce the cost of our real estate portfolio while effectively meeting the needs of partner agencies. As we move into FY17 and beyond, GSA will continue to work with partner agencies to pursue longer terms, where appropriate, so we can continue to reduce the government’s real estate costs.

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