Uncle Sam is embracing remote work. What does that portend for government real estate?
Chart of the Week
July 25, 2023
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The federal government is the largest office tenant in the United States and can have a pronounced impact on some markets. While there has been an effort to get federal workers back to the office, remote work remains the norm. This has prompted the government to reduce its office footprint. This is a stark change for an occupier whose footprint has grown inexorably for decades.
Setting aside Washington, D.C., Kansas City has the highest concentration of federal government agency tenants among the top 25 markets (Figure 1), occupying 8 million sq. ft., or 15+% of the total inventory. Atlanta also has a sizable number of federal government tenants, accounting for 3% of the total inventory. The average remaining lease term there is only three years versus a seven-year average for all 25 markets. We don’t know the degree to which the federal government’s footprint will contract, but we have an idea of the markets that could potentially be impacted.
Figure 1: Square Feet (Millions) and Remaining Rental Income (Millions, USD)
Source: General Services Administration, CBRE Econometric Advisors.