So far nearly 1,000 federal office leases have been terminated in a move that marks the beginning of several waves of reductions expected to conclude by the end of the fiscal year. However, this initiative has already encountered complications, as officials have discovered that many of the terminated leases were for public-facing facilities, which were not intended to be part of the cuts. As a result, the General Services Administration is now rescinding about 300 of these lease terminations, according to extensive reporting by the Federal News Network.
The news outlet spoke with four current or former GSA officials, all of whom requested anonymity. They revealed that the GSA did not consult with its regional offices before terminating the leases, and some tenant agencies were not notified beforehand.
The agency is contacting lessors to effectively retract the cancellations, saying, "Just kidding. We would like to cancel that [termination],” according to an official with GSA’s Public Buildings Service.
As one official told the publication, "Regions were told not to engage with the customers around this. The lease termination letters were being sent out to building owners PBS leased from in batches." This lack of communication has upset many tenant agencies, particularly as they are trying to comply with the mandate to return nearly all federal employees to the office.
The situation is further complicated because agencies will begin moving employees out of their current office space starting in June. Once a lease is terminated, agencies typically have about 120 days to relocate employees. In some cases, the GSA may not have time to arrange for the removal or disposal of furniture, leading to potential legal issues for lessors.
As one official explained, "In some cases, we’re being told, ‘Well, they’ll just abandon in place. Those lessors are going to be left with that price tag, and they’re going to have to just sue the federal government for that money back." Smaller companies may find it economically unfeasible to pursue such legal actions, forcing them to absorb the losses.
A GSA spokesperson emphasized that the agency is reviewing options to optimize its footprint and building utilization. "A component of our space consolidation plan will be the termination of many soft term leases. To the extent these terminations affect public facing facilities and/or existing tenants, we are working with our agency partners to secure suitable alternative space," the spokesperson told FNN.
Despite these efforts, the GSA is planning five more rounds of mass lease terminations by September 30, specifically targeting another 660 leases.
In addition to reducing current leases, the GSA has placed a hold on signing new ones. Acting GSA administrator Stephen Ehikian issued a memo in January suspending the execution of new agency funded obligations, including new leases, until further notice. Exceptions can be requested via email, but the freeze is largely in effect. This pause has led to delays and cost recalculations in projects where construction workers are being diverted to other projects due to GSA's inability to proceed with next steps.
As agencies are directed to return to the office full-time, they face challenges in accommodating employees due to footprints. The IRS, for instance, has acknowledged that some facilities lack sufficient space for returning employees. The GSA is also exploring significant changes to its operations, including selling its headquarters and potentially relocating its workers to the Interior Department's headquarters. However, no decision has been made on this relocation yet.
The pace of these changes is driven by officials from the Department of Government Efficiency, who have provided verbal directives without written documentation. As one GSA official explained to FNN, "We at GSA have asked for a lot of their direction to be written down and documented so that we can execute their plan according to the policy. A lot of that has been …. told no." This lack of clear guidance has left GSA officials with little room to push back against the rapid timeline for implementing these changes.