The U.S. government is the largest office occupier in the world—so when the General Services Administration (GSA) announces plans to sell off federal office buildings, it’s not just a bureaucratic decision. It’s a warning sign for the entire corporate real estate market.
For years, the federal government has been slow to embrace hybrid work, holding onto vast office footprints even as utilization rates plummeted. But now, with record-high vacancy levels and mounting costs, even the GSA is acknowledging a reality that corporate leaders have been wrestling with for years: the traditional office footprint no longer makes financial sense in a hybrid world.
The Federal Pivot to Hybrid Work
If the GSA decides to downsize its real estate portfolio, this could reflect a fundamental shift in workplace strategy. Agencies have been under increasing pressure to reduce costs, improve efficiency, and adapt to evolving workforce expectations. And despite political and organizational resistance, the numbers don’t lie: underutilized office space is a massive financial drain.
This move follows the Trump administration’s push to bring federal employees back to the office, but even with mandates, occupancy rates remain low. According to the Office of Management and Budget, the federal government spends $2 billion annually to operate and maintain underused office buildings. The GSA’s sell-off is an attempt to curb these costs while repurposing or offloading outdated spaces that no longer serve their purpose.
The GSA recently released a list of 443 non-core properties it plans to sell, including office buildings that house key federal agencies and public service facilities. Altogether, these properties account for nearly 80 million rentable square feet—about 12 times the size of the Pentagon. The agency estimates that selling these buildings could save over $430 million annually in operating costs, aligning with broader government efforts to reduce wasteful spending.
The Importance of Data-Driven Decisions in Real Estate
Since taking office, Trump adviser Elon Musk has turned his focus to the government’s leased office spaces, highlighting what he sees as excessive spending on underutilized properties. He has claimed responsibility for terminating 748 leases, amounting to over 9 million square feet of space. “Crazy that the government was just renting and paying for upkeep services of hundreds of empty buildings!” he wrote on X last week.
But while cutting costs is important, are these decisions being made with enough data on how office spaces are actually used? Musk has called for an end to remote work, but without a clear understanding of real office utilization, how can leaders make informed choices about space requirements?
This is where technology comes in. Platforms like Kadence provide businesses with real-time insights into office utilization, helping organizations determine what space they actually need. Instead of making blanket cuts or forcing employees back into offices without clear justification, companies—and governments—should base their real estate strategies on data-driven decisions.
Nevertheless, if an institution as traditionally rigid as the federal workplace is cutting back on real estate, what does that say about the private sector?
A Wake-Up Call for Corporations
Corporate leaders must pay attention: if the U.S. government is downsizing its office footprint, it’s time to reassess real estate strategies. Many global companies are still grappling with what hybrid work means in practice, balancing employee flexibility with leadership demands for in-person collaboration. But the GSA’s move underscores a harsh reality—holding onto excess office space is an unnecessary burden.
The commercial real estate market has already been feeling the squeeze, with declining demand, rising vacancies, and a growing number of office-to-residential conversions. The GSA’s sell-off will only add fuel to this trend, pushing landlords and corporate tenants alike to rethink their long-term commitments.
Some companies have already adapted, making informed decisions about office utilization rather than forcing full-time office returns. Citi, for example, has embraced hybrid work, allowing employees flexibility while ensuring office spaces remain purposeful. Unlike competitors that have mandated full-time returns, Citi has recognized that hybrid strategies contribute to talent retention and operational efficiency.
Others have leveraged Kadence to cut office costs intelligently. Five Good Friends optimized office usage by aligning workspaces with employee schedules, reducing unnecessary real estate expenses. Softchoice transitioned to a hybrid-first model with Kadence’s insights, ensuring that their office space remained efficient and cost-effective. MOO boosted office utilization to 70% while cutting real estate overhead.
The Case for Intentional Hybrid Work
Rather than forcing employees back into offices that no longer serve their needs, companies should be taking a proactive approach to hybrid work. This means:
- Optimizing office space for collaboration rather than assigning desks that remain empty most of the week.
- Leveraging technology to manage flexible work schedules, ensuring employees can book desks, meeting rooms, and collaborate effectively when they do come in.
- Reducing real estate costs by rightsizing office footprints and reinvesting savings into employee experience and business growth.
The Future of Office Space: Less, but Better
The era of sprawling office campuses and massive corporate headquarters is fading. Instead, companies that succeed in the hybrid era will embrace a more strategic approach to real estate—focusing on spaces that add real value rather than maintaining offices out of habit or outdated expectations.
The federal government’s sell-off isn’t just about cutting costs; it’s about adapting to a new reality. Corporate leaders would be wise to follow suit.
Kadence helps businesses navigate this transition by providing the tools and insights needed to make hybrid work truly work. If your company is looking to optimize office space and create a better workplace experience, let’s talk.
