Another view on the sale of federal buildings: need for updated facilities | Impact comparable to the closure of city-based navy shipyards?

I have been quick to criticize the Trump Administration for its agenda on shrinking its real estate portfolio.  While some of it, like abrogating leases, was a part of Trump/Musk DOGE agenda of destruction of the federal government without any connection to need for a functioning government--e.g. leases for Social Security offices and federal land management offices were broken--there is another issue.

The buildings, many built before 1980 are old, often poorly maintained and expensive to renovate.  Then it may make sense to sell and rebuild, or since the government is shrinking, lease smaller buildings.

The JFK Federal Building in Boston. Photo: Paul Marotta/Getty Images

From the Boston Globe article, "The federal government could soon sell these three big downtown Boston buildings The JFK, O’Neill, and McCormack federal buildings span 2.6 million square feet, combined. A federal board is considering putting them up for sale":

... much of the federal government’s 180 million-square-foot property portfolio needs extensive repair, and is riddled with expensive problems such as antiquated air systems, leaking roofs, unusable elevators, and flooding basements, the board said. Buildings managed by the GSA are on average more than 50 years old.

“Congress cannot appropriate its way out of this maintenance backlog,” said Nick Rahall, a former congressman from West Virginia and PBRB board member. “The inventory needs to be shrunk so tax dollars can be invested in properties where employees are actually coming to work.”

Like a broken clock being right twice a day, the Trump Administration has, amongst its chaotic and authoritarian decision making, made a couple of good decisions.  This may be one at least partially,.

-- "Trump Policies Shake the Foundations of the US Office Market," Natixis

-- "Trump May Sell Up to 67% of Government's Office Portfolio," CRE Daily

However, proponents of the sale of federal property argue that there is a lot of profit to be made ("Chance favors the prepared mind: residential conversion of federal buildings in Downtown DC needs "A Vision Plan for Judicious Conversion of Federal Properties in the District of Columbia."" [2025]) and that's a problem.  

The buildings are old, the commercial property market is soft, especially in Boston ("One of Boston’s skyline-defining towers is on the auction block — and expected to sell at a big discount," Boston Globe) and DC (The Increasing Levels of Vacant Office Space: The Achilles’ Heel of DC's Office Market), made only worse by federal government shrinkage and federal real estate being a significant element of the local market ("Trump wants to move 100K federal jobs out of D.C. What could that look like?," Virginia Public Media), and the buildings may not lend themselves to refurbishment, making the property valuable only in that it can be redeveloped after the expense of demolition of current facilities.

And, still, these decisions will be negative for most major downtowns where a sell off will occur ("The 443 federal buildings Trump administration could sell," Boston Globe).

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Impact as significant as closure of federal Navy Yards.  In the 1960s and later, the Department of Defense closed naval facility shipyard functions in cities like Brooklyn, DC, Boston, Charleston, South Carolina, and Philadelphia.  

Thousands of workers at the sites lost their jobs ("Military cutback will eliminate 37,000 jobs," AP, about a later round of closures), some functions were dispersed, often to suburbs, and with the multiplier effect even more jobs were lost (about the closure of the Navy Yard in Long Beach, "In Long Beach, an Era Ends in Tears," Los Angeles Times).

Blog commenter Will makes the point that this had significant impact on what was called 1960s "urban decline."  A lot of the jobs were industrial.  The closure shifted cities to a post-industrial economy but with fewer jobs overall, and fewer blue collar jobs especially.  (This is one of the arguments made by William Junious Wilson in When Work Disappears.

For example, at its peak in WW2, the Washington Navy Yard had 20,000 employees working on ships and munitions manufacturing, the Philadelphia Navy Yard, 40,000 employees (that facility didn't close until the 1990s), 42,000 at the Brooklyn Navy Yard.

At the time, too, these facilities were developers of innovative technology, although the concept of spinoff commercial technology transfer wasn't an issue then.

The shrinkage of the federal government under the Trump Administration will likely have similar effects.

Chance favors the prepared mind: residential conversion of federal buildings in Downtown DC needs "A Vision Plan for Judicious Conversion of Federal Properties in the District of Columbia."

Federal Triangle.

Heralded DC architect Shalom Baranes has an op ed in the Washington Business Journal, "Viewpoint: The federal government should vacate Federal Triangle," suggesting that the Public Buildings Reform Board has no real plan for its mission, being focused on maximizing revenue from property sales--so any sale is good.  Its focus within DC is south of Independence Avenue.

He counters, calling instead for a focus on the Federal Triangle to be "abandoned" to reduce the office space portfolio given the likelihood of there being too much space relative to demand, and that it's more convertible to residential property and would be in high demand, compared to the federal buildings in SW, but also to larger buildings harder to convert, but also less in demand in general given the fall off in demand for commercial property in most major cities, even major and what were previously strong markets

Federal properties south of Independence Avenue SW.

He makes good points about how this can be done judiciously, by focusing on older properties, with floors that are smaller, with more windows, as opposed to newer buildings with much larger floors and fewer windows, being harder to convert.  

This reminds me of an entry I wrote during the beginning of the Obama Administration, when people posited their thoughts about how Obama could benefit DC.

My response was Pasteur's line: "Chance favors the prepared mind" really means being prepared with plans or scenarios for action, when serendipitous opportunities are presented.  And that with no plan, the likelihood of taking advantage of serendipity is unlikely.

DC needs a plan to deal with the Public Buildings Reform Board.  If Shalom Baranes' good advice is to be effectuated, it needs to be converted into "A Vision Plan for Judicious Conversion of Federal Properties in the District of Columbia."  Basically a plan on the DC side, as opposed to the Federal side.

DC Government has been pushing the idea of residential conversion for some time ("The unintended consequences of converting office buildings to housing: the need for public safety; schools; amenities"), but it's countered by the fact that the city has also been more focused on federal workers being forced to RTO: Return to Office, instead of the covid-era policy of the hybrid office including full time WFH: Work From Home.

In normal times, it's tough to sell federal properties in DC because first it involves the federal government, but also has to get both the Legislative and Executive Branches to agree, at a time when the Executive Branch is anti-government, anti-urban, and anti-DC.  

According to the Wall Street Journal article, "The U.S. Government Has a Landlord, and Trump Isn’t a Fan," Trump would like to sell up to 2/3 of the federal office property portfolio.

The GSA has also been working to reduce the real estate it owns as more of its buildings deteriorate from a lack of maintenance. But it is hardly an easy task. Before auctioning off any properties, the GSA must typically make them available free or at a reduced cost to government entities. Ultimately the agency doesn’t keep the profits of the sales.

Much of what it can sell, Peebles said, will likely be at fire-sale prices. That could drag down the worth of other D.C. office buildings, which have already plunged in value in recent years. “Buildings will sell for 30 cents on the dollar,” Peebles said. “It’s a paradigm shift. There will be a dramatic reset on property values.”

So now's the time to act.

Pittsbutgh and a plan.  I don't know how much other cities are doing "judicious planning" around this issue, e.g., Pittsburgh ("Report: Transforming Downtown's empty offices is critical to revitalization," Pittsburgh Post-Gazette).  From the article:

Mass conversion of vacant office space into residential property could drive growth in Downtown and support ambitious revitalization plans, Pittsburgh Downtown Partnership officials said Thursday. At its first quarterly meeting of 2025, the organization shared details of its new, three-year plan for reshaping the Golden Triangle and revealed findings from a recent study on Downtown property.

Among the key takeaways from the study was that new residential conversions could help drive up Downtown’s population. “A higher Downtown residential population is going to increase both retail and office occupancy, which is ultimately going to stabilize Downtown real estate values and tax revenues,” said Aaron Sukenik, Vice President of District Development at the Pittsburgh Downtown Partnership.

... Meanwhile, the organization’s report stated that there’s high demand for housing, with 91% of the Golden Triangle’s rentable property occupied as of the last quarter of 2024. If all vacant office space was converted to residential space, researchers said, Downtown’s population could jump by more than 12,000 people — a game-changer for retailers who consider the number of residents living within a few miles of potential new sites.

DC may have to pursue both policies, residential conversion and RTO, s recognizing that downsizing is real ("Federal buildings chief eyes 50% space reduction, moving GSA out of its headquarters," Federal News Network).  

Or at least to take the opportunity to pull the Federal Triangle out of the day to day real estate portfolio, especially because regardless of even the current Trump Administration, the federal government doesn't like to get rid of highly visible properties.

Four more things

1.  Office headquarters to be recruited Downtown as a way to absorb office space.  I wrote about this a few years ago ("Could bringing premier regionally headquartered business enterprises to the Pennsylvania Avenue Corridor be key to its renewal and revitalization?" "Pennsylvania Avenue DC planning initiative," 2014) but I just don't think it's in the cards.  Besides downsizing, there aren't enough large regionally significantly businesses willing to move to Downtown DC. And commercial space use is on the decline ("National office space market is very bad (reprint from Bloomberg)").

2.  Can maglev help redefine the Central Business District?  Wrote about that a few years ago ("DC Transformational Projects Action Planning, and the Baltimore-Washington Maglev project," 2021).  The Northeast Maglev organization just stated that maglev between DC and Baltimore is possible in 10ish or so years ("Baltimore-to-Washington maglev train project still in motion," WBJ).  Of course, the real pay-off is connection to New York City.

3.  Resurrect former Rep. Mica's idea to give an FTC building to the National Gallery of Art for expansion ("Congressman Mica's quest pits FTC against National Gallery," Washington Post).

4.  DC needs a plan...