- The federal government is reportedly moving to sell off hundreds of office buildings it owns and then lease them back. While the deal could provide a short-term infusion of cash, it’s a long-term loser for the taxpayer, experts told Fortune.
The Trump administration is pushing to privatize “anything that can reasonably be privatized,” in the words of Tesla CEO and White House official Elon Musk. And part of that privatization now involves a tactic beloved by private equity: Selling federally owned buildings, then renting them back to the government.
The General Services Administration last month posted, then quickly removed, a list of 500 federal buildings which it deemed “non-core assets.” That list included the J. Edgar Hoover building, which houses the FBI; the Veterans Administration building, and buildings in Chicago and Boston that house senators’ offices, Wired reported. Currently, the GSA lists two dozen buildings available for sale, with the promise to “post additional assets regularly.” Meanwhile, GSA officials are moving ahead with plans to quietly sell hundreds of public buildings to private companies, the Washington Post reported—and then turn around and pay to rent them.
The move risks putting the government underwater for future generations to grapple with and opens up the possibility of developers getting corrupt deals, experts told Fortune.
“It’s great to get this big slug of money upfront when you sell the building but if you’re going to be leasing the building back for a period of time you’ve lost control of the real estate,” said Kevan Ventura, a principal in the real estate practice of law firm Goldberg Kohn.
“What does that mean 10 years from now when you need the space and you don’t control it anymore? Are your lease costs eventually going to outstrip what you made in profit?”
Timing is also a question: Commercial real estate values are still depressed from pre-pandemic levels, meaning the government may not get the full intrinsic value of many historic buildings.
“So many buildings have sold at deep discounts in recent months, particularly in the Washington, D.C. area, [that] corporate office landlords might be more hesitant at the moment to purchase office properties without quite knowing where or if values in the office market have bottomed out,” Ermengarde Jabir, director of economic research at Moody’s Analytics, told Fortune in an email.
What’s more, she added, if large parcels of choice real estate come onto the market at once, it risks further depressing the values of each building.
In a statement, a GSA spokesperson said, “At no time has there been any consideration of selling properties at a discount or outside of GSA’s normal process.”
The agency “is taking action to meet President Donald J. Trump’s direction to rightsize the federal real estate portfolio, cut costs for American taxpayers and optimize the space agencies need to achieve their missions,” the statement said, adding that the selloff of federal assets would be “consistent with all applicable laws.”
Sell now, pay later?
In a best-case scenario, real-estate professionals said, selling off underused buildings would free the government from paying unpredictable maintenance costs for aging real estate, and replacing them with a single predictable rent payment.
In the long run, though, such a deal would relinquish assets owned by the American public that could be used to generate revenue down the road.
In the worst-case scenario, the feds are setting themselves up to repeat the mistake the city of Chicago made in the Great Recession when it sold off rights to its parking meters to private investors in a move that was “a disaster,” according to three experts who brought it up, unprompted, as an example of how this type of deal can fail.
In the 2008 sale, Chicago received just under $1.2 billion in exchange for 75 years of revenue from its parking meters. Investors raised parking rates soon after the deal, more than doubling them in some cases to $6.50 an hour. That allowed them to recoup the purchase price in just 15 years—with 60 more years left to collect profits. The city lost out on a reliable revenue stream and gave up control of a portion of its own infrastructure.
“They got hosed,” said Donald Cohen, author of The Privatization of Everything.
Because real-estate investors would only bid on government buildings if they believed they could turn a profit renting them out, the sale is unlikely to provide long-term savings to agencies, he said. “They’re not going to pay less than whatever they’re [already] paying to maintain the building,” he said. “There’s no way to pay less; it’s physically not possible.”
Instead, he suggested the federal government could raise needed funds by subleasing parts of underused buildings to a private tenant. “Assets are valuable, and you can generate revenue from it,” he said. “Don’t give up your seed corn.”
Critics of DOGE suggest that getting the best deal for the government may not be the ultimate goal of the Trump administration’s cost-slashers. Instead, selling off a building is a shortcut way of shuttering programs the administration sees as wasteful, said Elizabeth Pancotti, managing director of policy and advocacy at the Groundwork Collaborative and a former Senate budget staffer.
She cited the example of Social Security, where the Trump administration has cut staff and at one point planned to close offices while adding new requirements for beneficiaries to show up in person for identity checks, straining the system.
If plans to sell off space go through, she added, “I’m not expecting to see a better deal for the taxpayer, I’m expecting to see real estate moguls getting a profit off it and reducing the services.”
