Feds to consider ‘compelling offers’ for real estate

The Trump administration’s push to sell federal office buildings across the nation appears to be far from dead.

A revised version of the “non-core” federal properties list is being prepared, a spokesperson for the General Services Administration, the federal property management agency, stated on Monday.

“We anticipate the list will be republished in the near future after we evaluate this initial input and determine how we can make it easier for stakeholders to understand the nuances of the assets listed,” stated the GSA spokesperson, who declined to be named.

Last week, the GSA posted and then took down a list of “non-core” federal properties to be sold. It’s unclear if the buildings will be added to the market, although the agency is listening to offers, according to the spokesperson.

A glut of office space

The Trump administration’s threat to unload large-scale federal office buildings now risks selling into a weak market.

Substantial economic data suggests the office market, particularly in Portland’s urban core, where the federal buildings are located, is in a fragile recovery that could be washed away by a flash flood of unneeded inventory.

Greg Goodman, co-president of Oregon-based real estate management company Downtown Development Group, noted that in his market, Portland has approximately 10.5 million square feet of vacant office space. In a good year, the market absorbs about 400,000 square feet — meaning Portland has about a 25-year supply of vacant office space.

Given that reality, if the federal government wants to dispose of office space, waiting may not make sense, Goodman said. “The market is where the market is, and if you want to wait, you’re going to be waiting a while.”

Net absorption in Portland was negative 964,776 square feet in 2024, according to JLL, meaning tenants put nearly 1 million square feet back into the market. Urban office vacancy hit 29.9 percent and may not have reached its peak, according to analysts.

“Near-term negative absorption is expected to persist as two sizable occupancy losses remain on the horizon,” JLL stated in its fourth-quarter report, citing moves by U.S. Bank and Standard Insurance.

“However, Portland office vacancy is approaching its peak and positive absorption is expected after the market works through these announced give-backs,” JLL reported.

Pain in Portland’s office market appears to be spreading. Last week, lender Ready Capital indicated on a call with investors that it was considering taking possession of the Block 216 tower, which includes 134,000 square feet of office space on five floors in addition to a Ritz-Carlton hotel, condominiums and retail space.

Investors have seen a “flight to quality,” where new, Class-A office buildings are performing better than their older peers. Some law firms and other professional services firms have committed to downtown office space, signing lengthy leases. Still, the office market remains far from its pre-pandemic peak.

“It’s definitely weak,” Goodman said.

Investors see opportunities

Yet some investors are skeptical that a major federal office sell-off will come to pass.

Menashe Properties doubled down on urban office space when it purchased the Montgomery Park building for $33 million in August 2024. Jordan Menashe, the firm’s CEO, said he doesn’t expect President Donald Trump to purge government office space.

“It would inflict too much pain,” he said. “It doesn’t make sense.”

Menashe said some federal agencies could choose to execute sale-leasebacks.

“Remember,” Menashe said of Trump, “he’s a real estate guy.”

The Trump administration’s “noise first and think later strategy is backfiring,” Buzz Ellis, managing director for JLL in Portland, stated in an email.

“Many of those federal buildings have significant infrastructure in them,” he added.

But Goodman said it makes sense for the federal government to consider selling real estate.

“If they’re signing a lease in the building and then selling it, that’s great,” he said.

Institutional investors will line up to purchase the buildings, Goodman said.

“Institutions will buy these as financial instruments,” he said. “There is no better credit than the federal government. If you have a 20-year lease, that’s better than a 20-year bond.”

Oregon’s state government should also consider sale-leasebacks of some of its real estate, Goodman said.

Menashe said he’s noticed signs of life in the office market. Competition has increased among institutional investors such as New York Life, which has snapped up distressed office properties in San Francisco.

“The institutions are back,” he said.

Return to what office?

The GSA’s website states the government is “identifying buildings and facilities that are not core to government operations, or non-core properties, for disposal. Selling ensures that taxpayer dollars are no longer spent on vacant or underutilized federal spaces. Disposing of these assets helps eliminate costly maintenance and allows us to reinvest in high-quality work environments that support agency missions.”

The initial “non-core” property list also included the Washington headquarters of numerous federal agencies, including the Federal Bureau of Investigation, the Department of Labor and the Department of Housing and Urban Development, The Associated Press reported.

“To be clear, just because an asset is on the list doesn’t mean it’s immediately for sale,” the GSA spokesperson stated. “However, we will consider compelling offers (in accordance with applicable laws and regulations) and do what’s best for the needs of the federal government and taxpayer.”

The GSA spokesperson stated that the goal of publishing a list of “non-core” real estate assets was two-fold: to “align with the president’s direction to bring federal employees back to high-performing office spaces throughout the country” and to “drive maximum value for the federal real estate footprint for the benefit of the American taxpayer.”

The move to sell off federal offices is in addition to lease cancellations that DOGE (the Department of Government Efficiency) is also considering, according to reports.

Some commentators have noted that the Trump administration’s push to sell federal buildings comes at the same time as the administration has ordered workers back to the office. The Office of Personnel Management, in a Jan. 28 email, told federal workers, “The substantial majority of federal employees who have been working remotely since Covid will be required to return to their physical offices five days a week,” The Associated Press reported.

That matches comments from Trump, who said publicly, “You have to go to your office and work. Otherwise, you’re not going to have a job.”