02 May 2011

Uncle Sam & Property Management

NY Times | Terry Pristin | U.S. Government Faces Criticism on Management of Real Estate

For more than six years Akridge, a developer in Washington, had its eye on a 10-story office building in Bethesda, Md., which had been vacant since the National Institutes of Health moved out in 2002.

But the federal government did not put the building on the market until November 2009. By then, of course, the real estate market had slumped. Akridge and its partner, Rockwood Capital, a real estate investment fund in White Plains, finally bought the building last October, paying $12.5 million, less than the $14 million asking price.

In a report last October Republicans in Congress pounced on the long delay in selling the Bethesda building — and the discounted price — as an example of how the federal government has been mismanaging its real estate holdings.
That lead has been getting some exposure in the blogs I read, but I think this is the paragraph that must be considered:
For one thing they must first be offered to other federal, state and local agencies. Officials also have to ascertain if the building has a community use — say, for a homeless shelter.
GSA has to jump through a lot of those legislation-created hurdles, like offering the space to "community service" organizations, and groups which provide services for the disabled. My friend in GSA's real estate arm says that's why they sat on the former NIH building in Bethesda so long.

I'm not sure whether this makes me feel better or worse about the situation. On the plus side, the wasted time and resources aren't simply the result of incompetence or carelessness, which is reassuring. On the minus side, it means this lengthy, inefficient procedure is actually intentional, which is scary.

But either way, that's the situation that needs to be addressed. Just saying "let's be more efficient about this, let's get serious" is not a solution. The analog to the Base Realignment and Closure Commission strikes me as a very good way to clear up the current mess, but what is going to be changed to stop it from recurring?

I think the requirement to offer unused federal buildings to homeless groups is a good example of why the state should not be pulling every available lever to attempt to achieve social goals: they end up pulling on some very inefficient levers. In isolation, every policy like this, or the rule that federal building should lease X% of their space to businesses run by the blind, etc., seem okay. But you put them all together and you get an byzantine mess. If you want more homeless shelters (and I do), allocate some money for more homeless shelters. Don't squeeze pro-homeless shelter rules into unrelated sections of the code.

~ ~ ~

Two other points:
In 2008 Congress authorized the General Services Administration to solicit bids for redeveloping the [Old Post Office in DC], but the requests for proposals went out only in March.
That sounds like the bureaucracy I know.

I propose a measure of bureaucratic inefficiency that might actually be possible for the public to measure. We ought to track how long it takes to get a response after submitting job applications to the OPM's centralized usajobs.gov site. I have multiple friends who have gotten responses -- not decisions, just a response like "you are qualified for the next round of our candidacy process and your application will be given further review" -- over a year after submitting their applications. If you can't even hire a new office staffer within six months, there's no way you'll be able to redevelop a historic building in a timely way.

(While a lot of that is just the bureaucracy moving glacially, a lot of it is also due to the same sorts of mandated hurdles and hoops that slow down the process of selling off government buildings.  Once again, I'm not sure which one of those causes is worse.)

This is hilariously self-serving quote that the Times utterly fails to call out:
Jeffrey D. DeBoer, the chief executive of the Real Estate Roundtable, a Washington trade group that represents industry leaders, described the proposed board [to manage the sale of unused government buildings] as a “positive idea.” But he urged the government to restrict its sales efforts for now to stronger markets with relatively low office vacancy rates, like Manhattan, the Back Bay area of Boston, Washington, San Francisco and the West Side of Los Angeles.

“Our concerns are about the unnecessary dumping of assets in some markets that are oversupplied because of economic conditions,” Mr. DeBoer said. “We want to make sure we don’t make weak markets weaker.”
"We" want to? Who is this "we"? What DeBoer is really saying is "I really, really don't want Uncle Sam to do anything that will depress the prices of the goods I deal in, but that sounds nakedly self-serving, so I will frame it as if I am actually looking out for the common good."

~ ~ ~

At least the GSA has an accurate inventory of federal buildings. New York State can't even manage that basic task.
The state of New York wastes an awful lot of taxpayer money on empty space, among other things:
More than a million square feet of state office space, roughly enough to fill the Chrysler Building, sits vacant, yet some state agencies were signing new leases as recently as December.

State agencies are paying millions of dollars to operate 850 toll-free numbers, almost half of which have not been dialed in months.

And while the government’s four major computer data centers are supposed to back up one another in the event of a crippling natural disaster or a terrorist attack, there is just one problem: All of the centers were built within a few miles of one another. Two are within sight of the State Capitol. [...]

Some of the problems became clear to the administration before it took office, when Mr. Cuomo’s transition team moved to the vacant half of a floor leased in a building on the Upper West Side by the State Department of Taxation and Finance.

Curious about why the department had so much excess space, Mr. Glaser asked state officials for an inventory of all real estate leased or owned at taxpayer expense. The answer: No such inventory existed.


  1. Let me go out on a limb: this means the government's just too damn big, doesn't it?

  2. I'm rarely if ever one to shy away from that diagnosis, but I'm not so sure that's the clear conclusion here.

    Property management is one of those government functions that I can see actually being run efficiently. Unlike, say, military procurement, there is a robust private-sector market in which to operate, and from which to take information.

    I think a real estate portfolio, even one as large as the federal governments, could be run quite well if they were willing to run it as a real estate portfolio rather than a convenient-but-inefficient lever to resolve inter-department squabbles, boost publicity for favored constituencies, and so forth.