Jones Lang LaSalle report finds federal leasing fell in 2012, but it will accelerate over the next two years thanks to a wave of lease expirations and pent-up demand
WASHINGTON, D.C., Dec. 5, 2012 — Lease awards by the General Services Administration (GSA) in fiscal year 2012 fell 96 percent year-over-year as a result of GSA scrutiny, gridlock in Congress and bipartisan support for reining in federal real estate expenditures. According to Jones Lang LaSalle’s Federal Perspective 2013, new GSA lease awards fell from $1.2 billion in fiscal year 2011 to just over $45.9 million in the comparable period of 2012.
While uncertainty about future spending priorities and federal agency budgets is expected to continue, the report said federal officials will have to stop deferring space decisions because 44.6 million square feet of leases are set to expire through the end of 2013 and more than 20 million square feet will expire in 2014.
“In the first four years of the Obama administration, there was a dramatic expansion of federal leasing activity, then a dramatic pullback,” said Joe Brennan, Managing Director, Jones Lang LaSalle. “We expect 2013 to be a much busier year, thanks to tremendous pent-up demand and tens of millions of square feet of lease expirations. The federal government will ultimately take less space, but there will be a lot of leasing activity in the next two years.”
The report notes that the days of federal lease expansion are over – at least temporarily. This is due to executive orders limiting the size of transactions, new mandates requiring offsets of new leases with consolidations or disposals and stipulations on increased utilization rates.
“In the next 18 months, the federal government will resume leasing activity andremain a large and vital segment of the office market,” Brennan said, noting that the federal government now occupies about 4.6 percent of all leased space nationwide. “The good news for landlords is that federal tenants stay in their space an average of 30 years, providing a stabilizing force for the office market across the country.”
Federal real estate – by the numbers:
· $1.2 billion: in new GSA lease awards in FY 2011 (Q2)
· $45.9 million: in new GSA lease awards in FY 2012 (Q2)
· 96%: year-over-year reduction in new GSA lease awards
· 171,396,917 square feet: GSA-leased office space nationwide
· 97%: GSA renewal probability in FY 2010
· 94%: GSA renewal probability in FY 2011
· 4.6%: approximate share of U.S. office space occupied by GSA
· 44,610,609 square feet: GSA leases expiring through year-end 2013
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Jones Lang LaSalle (NYSE: JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2011 global revenue of $3.6 billion, Jones Lang LaSalle serves clients in 70 countries from more than 1,000 locations worldwide, including 200 corporate offices. The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 2.1 billion square feet worldwide. LaSalle Investment Management, the company’s investment management business, is one of the world’s largest and most diverse in real estate with $47 billion of assets under management. For further information, please visit www.joneslanglasalle.com.