Reimagining Federal Real Estate: A Practical Path Forward
The federal government’s massive real estate portfolio is getting a fresh look. It spans thousands of buildings, many of them aging, underused, and expensive to maintain. Leaders from the National Institute of Building Sciences (NIBS) and Alvarez & Marsal recently joined the GovNavigators podcast to discuss how new policy tools, evolving workplace trends, and proven partnership models can help agencies make better use of their physical assets.
A Changing Federal Workplace
Office culture across all sectors has not returned to pre-covid norms, with many workplaces continuing with remote or hybrid models. In 2023, headquarter buildings in the D.C. area averaged 25 percent utilization. This shift led Congress to pass the Utilizing Space Efficiently and Improving Technologies (USE IT) Act in January. The law requires agencies to measure building utilization and take corrective steps. Though much of the federal government is under a mandate to return to the office, we are still short of maximum use.
NIBS President and CEO George Guszcza noted on the podcast that this is occurring in the context of a large and aging building portfolio. Deferred maintenance needs across federal offices now total $76 billion. Many facilities have seen capital improvement projects delayed for years. Correcting this waste, the administration announced a goal of reducing the federal footprint, targeting an 80 percent utilization rate, and freeing up resources for other priorities.
Balancing Disposals with Agency Needs
This combination of priorities may seem counterintuitive, cutting both the federal workforce and office space while simultaneously increasing the usage of federal buildings, but it requires careful sequencing to ensure agencies retain adequate workspace while reducing excess capacity.
Technology can assist in making these decisions. Space matching platforms can pair agencies in need of additional room with those that have a surplus. Digital twinning offers real-time insight into a building’s condition and capacity, supporting more effective lifecycle planning.
Borrowing from the Private Sector
From the private sector perspective, Alvarez & Marsal Managing Director Tom Scott pointed to both the scope of the challenge and the potential benefits. Federal agencies have identified 440 buildings for divestment, which could save $500 million annually in operating costs. Yet the current average disposal timeline of five to ten years slows progress and adds costs.
Senior Director Paul Firth outlined several tools the government could adapt from industry,
including:
Enhanced use leases to allow private sector tenants to occupy underutilized space.
Asset recycling, a model used in Australia, in which federal land is developed for commercial purposes while generating revenue for reinvestment.
Flexible leasing arrangements that shift maintenance obligations to private partners.
When considering the potential for underutilized federal real estate, reformers should be creative, while keeping in mind current demands. One suggestion from the podcast was turning some spaces into large data centers, which would support AI growth initiatives. These approaches can help accelerate disposals, generate income, and improve facilities.
Examples of Successful Partnerships
The federal government has several examples to build on. The redevelopment of The Yards in Washington, D.C. and Redstone Gateway in Huntsville, AL show how public-private partnerships can transform outdated properties into productive assets. Outside of D.C., the Denver Federal Center houses 6,000–7,000 employees from multiple agencies, achieving higher utilization through shared services and co-location.
These projects demonstrate that with experienced partners and sound governance, federal properties can serve both public missions and broader economic purposes.
Recommendations from the Field
The discussion concluded with three recommendations for federal property leaders:
Release property strategically to avoid oversupplying the market and diminishing returns.
Explore unique federal assets such as secure Department of Defense sites for data centers, taking advantage of existing infrastructure.
Engage proven developers early to shorten transaction timelines and ensure quality outcomes.
Reforms to federal real estate management do not need to be disruptive. By combining careful planning, data-driven decision-making, and effective partnerships, agencies can reduce costs, modernize facilities, and make more strategic use of the federal footprint.
Listen to the full GovNavigators episode
About Alvarez and Marsal
Alvarez & Marsal (A&M) is a global professional services firm that delivers performance improvement, turnaround management, and business advisory services. A&M works with organizations across industries to drive growth, enhance operational efficiency, resolve complex challenges, and deliver sustainable results through hands-on leadership and practical solutions. Visit their website to learn more.
About the National Institute of Building Sciences
The National Institute of Building Sciences (NIBS) was established by Congress in 1974 to improve the built environment for the American public. We unite research, policy, and practice to drive innovation across infrastructure and construction. Our mission is to create safe, resilient, and tech-forward communities. Through councils like DTC and FMOC, and stewardship of resources like the Whole Building Design Guide, we promote best practices and data-centric standards. NIBS empowers stakeholders to make informed decisions and convenes experts to address evolving challenges. Building American Innovation isn’t just our tagline; it’s our commitment.
