WASHINGTON, DC OFFICE

GSA LEASING
MARKET OVERVIEW
& OUTLOOK

DECEMBER 2019
 GOVERNMENT
LEASING
SNAPSHOT
WASHINGTON, DC END OF YEAR 2019

The federal government continues to seek value for large lease

requirements but the market concerning the General Services
Administration has shifted in recent quarters. With construction pricing
continuing to soar, the ability of developers to deliver newly constructed
office space for federal users below the $50 FS prospectus rent cap in the
District of Columbia has been dramatically eroded.

Consolidating large lease requirements into new space had been a notable
strategy for agencies such as the Department of Justice, the Federal Election
Commission, the Federal Communications Commission (FCC), the National Science
Foundation, the Transportation Security Administration and others. Looking forward,
with new construction options largely off the table amid this pricing pressure, look for
the government to begin to backfill previously occupied space that had been vacated
for new construction as well as renew and potentially downsize in existing buildings.
Several leases over the past 24 months demonstrate the new trend including the Pension
Benefit Guaranty Corporation’s proposed move to old FCC space in Southwest, the dual
move of the Peace Corps and Center on Budget and Policy Priorities to 1275 1st Street, NE in
NoMA, and DOJ backfilling 601 D St after previously relocating to 150 M Street, NE in NoMA.

This expected activity should help bolster the downtown Class B relet market that has seen
vacancy rise with federal migration to lower priced submarkets as well as continue to bolster
leasing fundamentals in the emerging submarkets like Southwest, the Capitol Riverfront and NoMA.
 AS A MAJOR EMPLOYER IN THE DC METRO, THE FEDERAL

FEDERAL GOVERNMENT HAS AN OUTSIZED EFFECT ON THE

REGION’S ECONOMY AND OFFICE SECTOR.

EMPLOYMENT With sequestration and political changes, the region saw a

drop and then stabilization in federal jobs; however, federal
contractors have been seeing some of the largest job
increases of any sector in the region.

390,000 3,300,000

380,000 3,200,000

370,000 3,100,000
TOTAL JOBS

360,000 3,000,000

350,000 2,900,000

340,000 2,800,000

330,000 2,700,000

320,000 2,600,000

US DC Metro (RHS)
GSA LEASED
FOOTPRINT SHRINKING
TRADITIONAL LARGE FOOTPRINT OCCUPIERS IN THE D.C. METRO,
SUCH AS THE FEDERAL GOVERNMENT, LARGELY REMAIN IN CONTRACTION MODE

60 57.7 24%
SQUARE FEET (MILLIONS)

48.3 23%
50 23%
22%
40 21.0
17.8 21%
30
11.9
9.9 20%
20
19% 19%
10
18%
24.7 20.6
0 17%
2012 2019
DC SMD NoVA % of Total DC Metro Occupied Inventory

REDUCE THE FOOTPRINT, A POLICY STARTED IN THE OBAMA ADMINISTRATION, REMAINS

IN FAVOR IN THE CURRENT ADMINISTRATION.

OMB has mandated GSA to shrink the overall federal real estate footprint through consolidation,
eliminating multiple leases and reducing office space. Consolidating large lease requirements
into new space had been the notable strategy for agencies such as the Department of Justice
(DOJ) in Constitution Square and the Federal Communications Commission in Sentinel Square.
 FEDERAL GOV’T “RIGHT-SIZING”
FREEZE/REDUCE THE FEDERAL FOOTPRINT

LEASED FEDERAL FOOTPRINT – 51 MSF WHEN WILL RIGHT-SIZE PROCESS BE FINISHED

100%

Square Feet (Millions)

14
90%
12
80%
10
70%
20.4 MSF,
8
42% 60%

6
50%
27.9 MSF, 58%
4 40%

2 30%

0 20%

Rightsized Not Rightsized

SF to be Rightsized % of Total Remaining Rightsizing Completed

LOOKING FORWARD, WITH NEW CONSTRUCTION OPTIONS LARGELY OFF

THE TABLE AMID PRICING PRESSURE, look for the GSA to begin to backfill
previously occupied space that had been vacated for new construction as
well as continue to renew, and potentially downsize, in existing buildings.
 EMERGING TRENDS
STATE OF GSA LEASES TODAY
Continuing downsizing efforts through
DOJ significant reduction in space
Rumors of portions of agencies may
BLM & FBI move out of the national capital region to
Colorado and Tennessee
Moving to St. Elizabeth’s redevelopment
DHS project in an emerging submarket
Moving 100K SF into exiting space at
IRS 77 K St NW in order to consolidate two
leases into one
Moving out of 700K SF in NoMA and
BLS downsizing to 400K SF in Suitland, MD
WHILE SUBJECT TO POLITICS AND
POLITICIANS, EFFICIENCY AND VALUE
ARE THE HOT TOPICS OF GSA LEASES.
Ongoing trends expected to continue
into 2020, and possibly further, include
backfilling underutilized space, moving
from leased to owned space, relocating
federal agencies out of the capital to
states like Colorado or Tennessee, and
consolidating agencies into existing space.
Over the past few years, the GSA has
been priced out of the East End and CBD
submarkets and forced to either renew
in place or relocate to emerging markets
where new construction has given them
efficiency, in both footprint and energy,
and space below the $50 FS rent cap.
With construction pricing continuing to
soar, the ability of developers to deliver
newly constructed office space for federal
users below the prospectus rent cap in DC
has been dramatically eroded.
 GSA LEASE
EXPIRATION SCHEDULE
OVER HALF of the entire
GSA leased real estate
8
7.5
7.7
footprint – 25.5 MSF -
7 WILL ROLL IN 2019-2023.
6.3
Square Feet (Millions)

5
4.5
4.3
4
3.4 3.5
2.9
3 2.6

1.9
2
1.4 1.4
0.9
1

0
Holdover 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030+

DC MD VA
 THE GSA DISCONNECT
FEDERAL LEASED SQUARE FEET EXPIRING VS. WHAT’S AVAILABLE THAT FITS
GSA REQUIREMENTS ($ CAP +ENERGY STAR, 25K SF CONTIGUOUS +)

12 11.3 25
21
Square Feet (Millions)

10

Number of Available
20
8

Properties
7.0
12 15
6 10
10
4 3.5 3.5

2 1.4 5
1.1

0 0
DC Northern Virginia Suburban MD
Available SF Expiring 2019-2022 Number of Buildings

WITH RISING RENTS IN THE CORE, GSA WILL BE FORCED TO RENEW IN PLACE
WHERE STRICT MANDATES DON’T APPLY OR MOVE TO THE EMERGING MARKETS,
both in DC and the surrounding metro area, where new construction can give them the
use and energy efficiency they say they need while being below the respective rent cap.
 FEDERAL FOOTPRINT
BREAKDOWN
FOOTPRINT BY MARKET

FOOTPRINT BY MARKET %% BREAKDOWN BY MARKET

BREAKDOWN BY MARKET
10.5 MSF 21.7 MSF
21% 43%
10.5 MSF DC 19.5% 67.3% 13.2% 111.5 MSF
21.7 MSF
21% 43%

NoVA 13.4% 68.5% 18.1% 133.6 MSF

17.9 MSF
36%
17.9 MSF
36% Sub MD 17.5% 65.2% 17.3% 60.1 MSF

DC NoVA Sub MD 0 20 40 60 80 100 120 140

Federal Private Sector Vacant

DC NoVA Sub MD

The GSA makes up

16% OF LEASED SPACE
in the DC metro area.
 FEDERAL FOOTPRINT
BREAKDOWN
2% 1% 3% 2%

8%
11%
31%
13%
37%

20%
DC 23% VA
25% 24%

Southwest Cap Hill/NoMa

East End CBD 5% Arlington Fairfax County Alexandria
Riverfront Uptown Falls Church Loudoun Fairfax City

West End/Gtown
28%

MD 67%

Montgomery Prince George's

Frederick
FUTURE NoMa 1 1

FEDERAL East End 2

RELOCATIONS?
LIMITED 100K SF+ RELET RELOCATION
Southwest 1 2

OPTIONS UNDER $50 FS

Riverfront 1

0 1 2 3

Vacant 2020 2021

LARGE BLOCKS SUITED FOR GOVERNMENT RELOCATION

MOVING EAST AND SOUTH
BUILDING SUBMARKET SF AVAILABLE CLASS VACATED TENANT

810 1ST STREET NE NOMA 189,000 B DC GOVERNMENT

1100 1ST STREET NE NOMA 186,678 A GSA – VA & FERC

20 M STREET SE CAPITOL RIVERFRONT 108,567 A GSA - BLM

470-490 L’ENFANT PLAZA SW SOUTHWEST 179,519 B GSA - NTSB

445 12TH STREET SW SOUTHWEST 159,424 A GSA - FCC

800 9TH STREET SW SOUTHWEST 125,860 B GSA – DEPT. AGRICULTURE

600 E STREET NW EAST END 294,894 B GSA - DOJ

1125 15TH STREET NW EAST END 255,931 B GSA – DISABILITY SERVICES

 SOUTHWEST
CASE STUDY
LIKELY LARGE BLOCK RENEWALS / EXTENSIONS

55O 12TH STREET SW 375 E STREET SW 50O 12TH STREET SW 409 3RD STREET SW
290,000 SF 238,143 SF 502,997 SF 254,267 SF
GSA - DEPT OF ED GSA - FBI & DEPT OF LABOR GSA - DHS GSA - SBA
2020 EXP 2021 EXP 2022 EXP 2022 EXP
 MAJOR GSA DEALS 2019
DC METRO AREA

DEPARTMENT BUILDING SUBMARKET SF LEASE TYPE CLASS

NATIONAL COUNTERTERRORISM
CENTER/CIA 499 GROVE ST/399 GROVE ST RESTON/HERNDON 742,283 RENEWAL A

DOJ 150 M ST NE CAPITOL HILL/NOMA 475,100 NEW LEASE A

PEACE CORP & CENTER ON

BUDGET AND POLICY PRIORITIES 1275 1ST ST NE CAPITOL HILL/NOMA 309,695 NEW LEASES A

FAA 950 L'ENFANT PLAZA SW SOUTHWEST 100,000 RENEWAL B

US CUSTOMS AND CRYSTAL CITY/

BORDER PROTECTION 1901 S BELL ST PENTAGON CITY 77,454 RENEWAL B

CRYSTAL CITY/
FEMA 2200 CRYSTAL DRIVE PENTAGON CITY 72,000 RENEWAL B

COURTHOUSE/
DHS 1310 N COURTHOUSE RD CLARENDON/ 71,027 RENEWAL B
VIRGINIA SQUARE

DEFENSE NUCLEAR FACILITIES

SAFETY BOARD 625 INDIANA AVENUE NW EAST END 61,684 RENEWAL C
To learn more about GSA and the
DC metro market, please contact:
Nathan Edwards
nathan.edwards@cushwake.com

Lauren Kraemer
lauren.kraemer@cushwake.com

Ryan McMahon
ryan.mcmahon@cushwake.com

©2019 Cushman & Wakefield. All rights reserved. The information

contained in this communication is strictly confidential. This
information has been obtained from sources believed to
be reliable but has not been verified. NO WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, IS MADE AS TO
THE CONDITION OF THE PROPERTY (OR PROPERTIES)
REFERENCED HEREIN ORAS TO THE ACCURACY OR
COMPLETENESS OF THE INFORMATION CONTAINED HEREIN,
AND SAME IS SUBMITTED SUBJECT TO ERRORS,OMISSIONS,
CHANGE OF PRICE, RENTAL OR OTHER CONDITIONS,
WITHDRAWAL WITHOUT NOTICE, AND TO ANY SPECIAL
LISTING CONDITIONS IMPOSED BY THE PROPERTY OWNER(S).
ANY PROJECTIONS, OPINIONS OR ESTIMATES ARE SUBJECT
TO UNCERTAINTY AND DO NOT SIGNIFY CURRENT OR
FUTURE PROPERTY PERFORMANCE.