When you ask someone, “What organization is the largest occupier of commercial real estate in the U.S.?” they might guess a large international company with tens of thousands of employees, like Microsoft, Deloitte, or Amazon. But the title of largest occupier belongs to the U.S. General Services Administration (GSA), and it’s not even a close competition. According to the GSA, the agency owns and leases over 376.9 million square feet of space in 9,600 buildings throughout more than 2,200 communities nationwide. This includes more than 8,100 leased properties.
The GSA procures goods and services for the many agencies of the U.S. government. GSA Public Buildings Services (PBS) leases and manages space for federal agencies, such as local IRS and Social Security Administration offices, FBI facilities, and U.S. Attorneys’ offices.
Governments are notoriously burdened with bureaucratic red tape. For this reason, many real estate managers balk at the prospect of managing a property with any U.S. government agency as a tenant. They imagine long timelines, frustrating regulations, and tenant representatives who are public servants with no decision-making authority.
But those who specialize in these buildings have come to appreciate the opportunity that managing GSA properties offers and the reasonable way our GSA stakeholders conduct business. We also appreciate the guaranteed rental income, backed by the full faith and credit of the U.S. government.
Let’s look at some of the critical issues you’ll encounter as a real estate manager when you work with GSA tenants.
GSA sets the course
The GSA outlines the entire process for working with the government as a potential client. The GSA leasing process—from bidding on the lease to managing the government agency’s occupancy—generally adheres to their procedures and rules.
In many cases, this is without deviation because that process has been created to ensure that all parties—government and private-sector partners alike—abide by U.S. laws and regulations. There’s still enough room for negotiation and flexibility for the government’s representatives to adapt their lease requirements to specific markets and space needs. But overall, the GSA adheres to its processes and contracts, and they require landlords to do the same.
GSA documents and policy updates
You must use the GSA’s documents in order to work with them. This includes their lease requirements and the lease document, addendums, and attachments. Government leases are very long and intimidating; they require patience and confidence. Make sure you know your GSA terminology, and become very familiar with the lease.
Most government leases cover full tenant space and equipment maintenance, with expenses recovered through the lease and periodic escalations. Servicing GSA leases can be expensive if landlords haven’t fully understood the expense escalations defined in the lease. Paul White, CPM® Emeritus, president of Paul L. White & Associates, Inc., has extensive experience working with the GSA. He describes such a situation: “I had a client who’d purchased a GSA building. They didn’t understand how the expense escalations worked, so it was not a financially profitable lease. We had to work to get that situation turned around.”
Working with the GSA
Throughout the bidding process, the lease contracting officer (LCO) is primarily responsible for the lease procurement and award, with leasing specialists and project managers also contributing. Post-award, the LCO still has sole authority to commit the government and may become involved with any issues during the lease term. However, a contracting officer’s representative (COR) or contracting officer’s technical representative (COTR) takes over lease management to ensure the lease terms are followed.
White says this transition from the bidding process to the post-award and occupancy phases can be tricky, as the COR/COTR becomes familiar with the specific lease terms and what’s been negotiated. “That transition is the only wrinkle in the process,” says White. “If a problem comes up, they need to discuss it with the other side.”
Communication and problem-solving are the best approaches to take with GSA representatives. The GSA expects property management companies they work with to strictly follow the terms of the lease, such as maintenance schedules, sustainability requirements, and specific services provided to the government agency in the space.
The type of agency in the building, including whether they provide public services, plays a big part in managing that building and its occupancy. A business office for a research division of the Department of Labor is very different from a ground-floor Social Security Administration Service Center.
The best course of action with any agency is fair-mindedness when disputes arise. The GSA becomes challenging when a landlord becomes rigid and difficult. Otherwise, they’ll work with you on solving problems. “The LCO’s job is to be fair and reasonable,” says White. “It’s in their job description: be fair and reasonable. They don’t want to put anyone out of business. They just want the landlord to do what they agreed to do.”
The main benefit of working with the GSA? That rent check will be deposited every month, guaranteed. The security of that rental income means peace of mind for real estate managers. And that peace of mind, along with the rewards of working with fair and reasonable clients, makes managing properties with GSA leases some of the most valuable experiences of my 20-plus-year career.