Breaking Down the Federal Real Estate Shakeup

By William W. Riggins and Richard A. Loube

April 25, 2025

The article examines the Trump administration’s recent efforts to rapidly reduce the federal government’s real estate holdings, describing both the legal processes for terminating leases and disposing of federally owned properties, as well as the legal tools that may be used to accelerate these actions. It provides an overview of how surplus federal properties are identified, prioritized, and ultimately transferred or sold under current law.

While there have been efforts under previous administrations to reduce the federal government’s real estate footprint, the scope and speed with which the Trump administration proposes to reduce that footprint is unprecedented. This article describes some of the recent actions taken by the administration to reduce its real estate footprint and summarizes the steps required by law to effectuate these reductions.

Lease Terminations:

Acting through the U.S. General Services Administration (GSA), the administration is targeting a 50% reduction of leased office space. It has instructed the GSA to terminate GSA leases, which has been a source of confusion for landlords with tenants under GSA leases. Although government contracts generally permit federal agencies to terminate for convenience, the same is not true of GSA leases.

GSA leases typically include two lease terms – an initial “firm term”, and a subsequent “soft term”. The firm term (typically, the first 10 or 15 years of the lease term) signifies the period during which there is no right for the GSA to terminate the lease. The soft term signifies the period after the firm term expires and during which the GSA may terminate the lease without penalty, typically on 90-180 days’ advance written notice.

Despite this distinction, the administration erroneously sent lease termination notices to some landlords with GSA leases still in their firm term. According to GSA officials, the GSA is now aiming to fix those errors and will limit terminations to leases in the soft term.

Disposal of Federally Owned Properties

In addition to early lease terminations, the administration also announced its plan to dispose of hundreds of federally owned properties. On March 4, the GSA published a list of over 440 federally owned properties determined to be “noncore assets” slated for disposition. Of those properties identified as “noncore assets,” over 100 were in the greater Washington DC area. By the next day, the GSA had removed the list of these noncore assets for disposal, but weeks later it began adding buildings back to the list. GSA has been relisting properties in tranches under what it calls “accelerated disposition”, and as of April 24, 2025, there are several DC-area buildings back on the list.

Notwithstanding GSA’s desire for “accelerated disposition”, GSA must follow the process required by federal law when disposing of federally owned property. Before the GSA may dispose of federal property for fair market value, it must first offer the property to other federal agencies that may have a need for the property. Federal regulations require GSA to circulate a formal notice to the federal landholding agencies, which then have a short time period to express their written interest, followed by 60 days to submit a formal transfer request. If a federal agency identifies a need, the property can be transferred to that agency.

Surplus Property

If no other federal agency expresses a need, then the property is declared “surplus” and may be made available to state and local governments or eligible nonprofit organizations for transfer as a “public benefit conveyance” under the Federal Property and Administrative Services Act of 1949 (FPASA) and/or the McKinney-Vento Homeless Assistance Act (the “McKinney-Vento Act”). Under the McKinney-Vento Act, use of surplus federal property for homeless assistance takes priority over all other potential public benefit conveyances. Once GSA declares a property as surplus, it notifies the U.S. Department of Housing and Urban Development (HUD), which then reviews the property to determine its suitability for use by homeless service providers. If HUD determines that a property is suitable for homeless assistance, then HUD posts the property on its list of available properties for 60 days. HUD then reviews applications from eligible organizations (including state and local governments) and if an applicant meets the eligibility criteria, the property may be transferred in fee or leased to the applicant at no cost. Any fee simple conveyance will be subject to a deed covenant requiring that the property be used solely for homeless assistance for a period of 30 years – otherwise the property will revert back to the government.

If surplus property is not transferred for homeless assistance, then it can be considered for other public benefit conveyances under FPASA. FPASA created the General Services Administration and provided a process for the disposition of surplus federal property to non-profit educational and public health institutions for health and education purposes at a discount of up to 100% of the fair market value of the property. To qualify for this type of public benefit conveyance, the non-profit must meet specific eligibility requirements and submit an application containing a detailed plan outlining how they intend to use the property, together with proof of the organization’s capability to manage and maintain the property effectively. The plan must detail a qualifying public benefit, such as public health or education, and demonstrate the organization’s ability to execute that plan. If GSA determines that the non-profit organization is eligible and the proposed use meets the public purpose criteria, the property is transferred to that organization. The deed will typically contain a covenant that the property must be used for the approved public purpose for 30 years or revert back to the government. After the property is transferred, the GSA or relevant federal agency may monitor the use of the property to ensure it continues to serve the intended public purpose. If a non-profit organization fails to comply with the terms of the transfer, the GSA has mechanisms in place to enforce compliance, including requiring corrective action or even reversion of the property back to the government. Under the applicable regulations, public benefit conveyances are subject to the discretion of the GSA administrator based on a highest and best use analysis (one exception being, under the McKinney Vento Act, surplus property must first be made available for serving the homeless).

Public Sale

If the surplus property is not transferred pursuant to a public benefit conveyance, GSA can then dispose of the property through a competitive sale to the public for fair market value. But before putting the property on the market, GSA must follow several key steps. First, GSA must comply with the National Environmental Policy Act (NEPA) by conducting an environmental assessment or environmental impact statement. Second, if the property is historic or located in an historic district, GSA must comply with the National Historic Preservation Act (NHPA), consulting with the applicable State historic preservation office and other stakeholders as necessary. Third, GSA must obtain an independent appraisal to determine the fair market value of the property in order to set the minimum price for the sale. Finally, GSA reviews title, survey and the zoning and land use status to inform potential buyers of any restrictions.

GSA may use several methods to sell the property, including open auction, sealed bid auction or negotiated sale. In the two (2) auction scenarios, properties are posted on the GSA auction site, along with all information necessary to bid on a property. Interested parties are invited to attend open houses, tour and inspect the property before the deadline for offers. GSA reviews all bids to ensure they meet the terms and conditions of the sale, including financial capability and compliance with any special requirements. The property is awarded to the highest responsive bidder.

Negotiated Sale

Federal law allows the GSA to enter into a negotiated sale process only under certain circumstances, including when the character or condition of the property or unusual circumstances make it impractical to advertise for competitive bids and the fair market value of the property and other satisfactory terms of disposal are obtainable by negotiation.

“Accelerated Disposition”

Notwithstanding the statutory and regulatory requirements described above, the GSA has said that the accelerated disposal process will involve posting known information on each property while it completes the statutorily required process. Interested parties can conduct their due diligence while the legally required steps are taken, and once cleared, the asset can be offered for public sale as described above. This is what GSA is aiming to do by recently relisting many of the properties on its website.

Another tool that may speed up the disposal of federal properties is the Federal Assets Sale and Transfer Act of 2016 (FAST Act). The FAST Act includes several mechanisms to streamline the process for disposing of federal properties, reducing bureaucratic delays, and allowing for faster sales. Importantly, the FAST Act created the Public Buildings Reform Board (PBRB) to centralize the oversight and coordination of property disposal. This independent board is responsible for identifying properties suitable for disposal and making recommendations to the Office of Management and Budget (OMB) and Congress. PBRB maintains a comprehensive inventory of federal properties and uses standardized criteria to assess properties, with the goal being a consistent and objective evaluation process. By having a dedicated body focused on this task, the hope is that the process becomes more organized and efficient. In addition, the FAST Act includes several provisions that enable the GSA to expedite the disposal process. For example, the FAST Act allows for the waiver or modification of certain NEPA environmental review requirements. This can significantly reduce the time and complexity involved in preparing the environmental assessments and impact statements mentioned above. Also, the FAST Act allows GSA to bypass some of the historic preservation requirements under NHPA for properties that are not deemed to have significant historic value. This exemption helps to avoid lengthy consultations and reviews with the federal Advisory Council on Historic Preservation and other stakeholders. As another example, the FAST Act can simplify the process for conveying properties for public benefit purposes by reducing the paperwork and approval steps required for these conveyances. The ability of the administration and the GSA to properly take advantage of the tools provided by the FAST Act could speed the disposal of surplus properties.

Disclaimer: The opinions expressed in this article are those of the authors and do not necessarily reflect the opinions or positions of Miles & Stockbridge or its other lawyers.

Endnotes

1. William Riggins is a principal in the Real Estate Practice Group at Miles & Stockbridge PC, representing buyers, sellers, developers, investors, landlords and tenants in a variety of real estate transactions including equity and debt transactions, acquisition and sales, leasing, mixed-use development and construction contracts.

2. Richard Loube is a principal in the Real Estate Practice Group at Miles & Stockbridge PC, advising developers, investors and borrowers on various aspects of commercial real estate and finance, including acquisitions and sales; equity and debt transactions, joint ventures, commercial leasing and construction contracts.