Recent Trends and Key Insights in the Federal Real Estate Sector

Nearly five years have passed since the onset of the COVID-19 pandemic. While much in our daily lives has returned to a sense of normalcy, office occupancy — particularly within the federal government — remains a challenge. Before President Donald Trump’s recent Executive Order to return to in-person work, private-sector organizations like Amazon had already implemented more robust return-to-office (RTO) policies.

Looking ahead, during President Trump’s second term, the Department of Government Efficiency (DOGE), led by figures including Elon Musk, will bring transformative changes to federal operations. The DOGE’s primary mission is to optimize government efficiency by addressing systemic inefficiencies, and federal real estate is expected to be a major area of focus. In addition, on January 16, 2025, House Oversight Chairman James Comer announced new legislation aimed at curbing pandemic-era telework policies. The bill mandates that federal agencies revert to pre-2019 telework levels within 30 days, with any future telework expansions requiring resubmitted plans for congressional approval.

While most agree that reducing government spending is critical, significant resistance is expected from the federal workforce and the unions that represent a substantial portion of it. For instance, the American Federation of Government Employees, representing 42,000 staff members of the Social Security Administration, recently negotiated an agreement to maintain their current telework arrangements of two to five office days per week through 2029. It’s likely that these negotiations were handled quickly to ensure they were completed prior to the new Trump administration taking office.

Executive Orders

President Trump’s Executive Order to terminate remote work agreements and require federal employees to return to work in-person on a full-time basis has already been challenged by the National Treasury Employees Union (NTEU). NTEU represents federal employees of more than 37 agencies. It is estimated that approximately 30% of federal workers in the National Capital Region are unionized.

Additionally, Trump reimplemented an Executive Order that weakens certain protections of Federal Employees, making them easier to lay off. This policy, commonly known as “Schedule F” had previously been removed via Executive Order under the Biden administration. Some believe these two Executive Orders could allow federal government employees to be fired with cause if they do not comply with the return-to-office mandate. Such back-and-forth policymaking underscores an uncertain future for federal workforce logistics and the need for office space that can support the demands of varying political missions.

Changes in GSA’s Leadership

President Trump has appointed Stephen Ehikian as the acting administrator and deputy administer of the General Services administration (GSA). Ehikian, a tech entrepreneur who previously sold his sales and customer service-focused businesses to Salesforce Inc.

Additionally, Michael Peters has been named the new commissioner of GSA’s Public Buildings Service. Peters, with an extensive background in the banking sector at firms like DLJ, Credit Suisse, and Honeywell International Inc. is expected to leverage his financial expertise to guide key initiatives.

Ehikian and Peters are tasked with implementing the Trump administration’s directive to optimize the Federal Real Estate portfolio, improving efficiency and reducing costs to the taxpayer. Ehikian has already announced plans to accelerate the disposition of underutilized and inefficient buildings, reduce capital liabilities, and transition federal operations into more modern and appropriately sized spaces.

Federally Owned Real Estate

The General Services Administration (GSA) is working to modernize existing federally owned properties, many of which are outdated, underutilized, and unappealing as workspaces. The Inflation Reduction Act of 2022 allocated funding toward modernization projects, though it remains unclear how far these funds will reach, given that many buildings have not seen major updates in 40-50 years.

In early December 2024, the GSA also announced plans for federal building disposals in addition to property updates, signaling a strategic effort to optimize property portfolios. For example, four prominent federal buildings in Washington, DC, totaling more than two million rentable square feet (RSF) are set to be auctioned off in 2025:

• 301 7th Street SW (GSA Regional Office Building): 845,000 RSF
• 940 H Street NW (The Webster School): 27,500 RSF
• 401 14th Street SW (Liberty Loan Building): 133,000 RSF
• 330 Independence Avenue SW (Wilbur J. Cohen Federal Building): 1.2 million RSF

According to data from the GSA, the federal government currently owns approximately 37 million RSF in Washington, DC. While no overarching target has been announced, it is anticipated that disposals will increase significantly under the second Trump administration, with some experts speculating that up to two-thirds of the federal real estate portfolio could be sold to the private sector.

Footprint Reductions

The GSA’s efforts to optimize its real estate portfolio have led to significant reductions in space and costs. Over the past four years, the agency has decreased its national footprint by nearly eight million square feet as part of its strategy to improve space utilization and efficiency. Currently, 23 million square feet of office space have been officially designated as underutilized nationwide, highlighting the potential for further consolidation. By shedding up to 30% of its leased and owned office space across the country, the GSA estimates it could save taxpayers as much as $60 billion over the next decade, aligning with the agency’s broader goals of greater fiscal responsibility and more sustainable management.

In January of 2025, the Biden administration signed a new law targeting the government’s inefficient use of space. The law requires all government agencies to report their occupancy data annually, and those occupying less than 60% of their space must take corrective action in the following year or be subject to reduced footprints in future real estate actions. This program is to be tested over a two-year period and will then be re-evaluated by Congress. Consolidation clearly remains a priority, and it has led to a decline in leasing activity, especially for spaces smaller than 15,000 RSF.

Expected Agency Reductions Nationally (SF)

GSA Policy Change Affects Occupancy Agreements

A noteworthy shift in GSA policy relates to occupancy agreements (OAs) with tenant agencies. Historically, OAs were cancellable agreements allowing agencies to return leased space to GSA without significant consequence; the GSA absorbed the risk of 10-, 15-, and even 20-year guaranteed terms with aggressive rental rates. This flexibility worked during periods of growth, as agencies rarely terminated their leases early; however, occupancy changes stemming from the pandemic upended this dynamic.

Now, many agencies have chosen to terminate their OAs earlier than anticipated, leaving the GSA financially accountable for the remaining lease obligations. To address this challenge, the GSA transitioned to non-cancellable OAs, aligning the agreement terms with the firm lease term.

This policy shift, tested throughout 2024, appears to be here to stay. While it provides the GSA with more stability, it has reduced lease terms and created challenges for competing properties aiming to attract federal agencies away from their existing locations.

Average GSA Lease Term Awarded (Months)

Major Lincoln Successes in Federal Real Estate

The Lincoln Government Services Group (Lincoln GSG) has been at the forefront of several significant federal real estate transactions in 2024. These include one of the largest GSA transactions in the National Capital Region: Relocating the Court Services and Offender Supervision Agency (CSOSA) Headquarters. Successful relocation of the agency’s headquarters from 633 Indiana Ave. NW to 501 3rd St. NW within Washington, DC, involved a 20-year lease for 198,000 RSF and was valued at $178 million. CSOSA is expected to occupy this space by late 2026.

501 3rd Street NW, Washington, D.C. 20001

Additional notable Lincoln GSG transactions for the federal government include:

• National Institute of Health (Bethesda, MD): 123,750 RSF
• Millennium Challenge Corporation (Washington, DC): 83,105 RSF
• United States Navy (Lexington Park, MD): 49,113 RSF
• Internal Revenue Service (Rockville, MD): 19,146 RSF
• Veterans Affairs (Linthicum Heights, MD): 11,000 RSF

Through these successful negotiations, Lincoln GSG has consistently demonstrated its expertise in securing efficient, high-value outcomes for federal tenants and property stakeholders.

Looking Ahead

With evolving return-to-office policies, changing occupancy agreements, and a focus on reducing and modernizing the federal real estate footprint, the future of the federal real estate sector — both in and out of Washington, DC — will depend largely on policy shifts and market adaptability. Lincoln GSG is well-positioned to help clients strategize and achieve their goals within this complex and rapidly changing landscape.

Whether it’s navigating consolidation efforts, addressing leasing negotiations (including early renewals), or executing large-scale relocations, Lincoln GSG’s expertise ensures strategic, forward-thinking solutions for all stakeholders involved in the ever-changing federal real estate landscape.