The General Services Administration has inked a long-term renewal for a Treasury Department agency in Vienna citing the higher costs it would incur by moving to a new location, countering the argument by many in the commercial real estate industry that it can be more efficient these days to move than to stay put.
The GSA, in a Dec. 24 notice posted to FedBizOpps.gov, said it has awarded a lease renewal to the owners of 2070 Chain Bridge Road for Treasury’s Financial Crimes Enforcement Network. The renewed lease is valued at $53.9 million. The agency has been at 2070 Chain Bridge Road, also known as the Toilet Bowl Building for its architectural design, since April 2004. The building, you may recall, received a nod in my December 2013 cover story on the region’s ugliest buildings.
The GSA has been under sustained pressure from the White House and Congress to reduce the federal government’s real estate costs, and one of the ways the agency has sought to do that is by moving agencies from older, less-efficient buildings into newer ones. To that end, the GSA’s budget request for the past two years has included $100 million to cover agency relocation costs.
That appears not to have been the case here. In a redacted notice included with its disclosure, the GSA said it received 9 viable responses to a December 2013 expressions of interest posted to FedBizOpps.gov after eliminating one that was not close enough to Metro. The solicitation proposed reducing the agency’s footprint from 164,000 square feet to 125,000 square feet for a lease of up to 15 years. The “justification for other than full and open competition” notice did not say whether the rental rates for the space were comparable on their face values, and that financial data was blacked out, but the GSA stated a renewal is the best option when factoring in move and build-out costs for new space. The GSA estimates that, when factoring in tenant improvement, move and build-out costs, renewing its current lease would save $21.2 million over the lowest-priced alternative.
Several federal real estate experts have questioned these kinds of notices in the past, particularly since the redacted notices do not disclose how much money the GSA is estimating for relocation costs. What’s more, there tends to be significant competition from D.C.-area landlords for federal agency leases, especially those for in excess of 100,000 square feet these days. And yet, I heard from a number of federal leasing experts questioning the GSA’s stated level of competitive interest in November, when the agency announced it renewed the lease for two federal agencies at 1800 M St. NW, the Civilian Board of Contract Appeals and the Medicaid and CHIP Payment and Access Commission. With that renewal, however, the GSA said in its justification notice it failed to attract a single interested bidder beyond the incumbent landlord.
