a new lease
The point at issue: the SEC, which has been leasing office space for itself for the past twenty years, inked a ten-year contract last July for 900,000 square feet of prime office space in downtown Washington. According to the Financial Times, rent for the new space in Constitution Center amounts to $51.8 million annually.
unusual or not?
What’s unusual about the signing? For the SEC, a critic might say it’s just business as usual. Anyway:
1. It comes at a time when the agency is cutting back on investigations for lack of resources
2. The SEC bypassed government competitive bidding requirements for leasing office space, by declaring this situation was an emergency
3. Normally, government agencies wait for Congress to appropriate the money before spending it. The SEC didn’t in this case. And it now appears the extra funds will not be coming any time soon,
4. The SEC doesn’t need the space. It’s moving a bunch of people from the suburbs, where rents are presumably much cheaper, to fill some of it up. And it’s trying to get out of its obligation for two-thirds of the space it just signed up for. My guess is that it will end up subletting the space at a loss to some other arm of the Federal government.
the lease expense is huge
Two other factors make this deal stand out:
1. If you take the $51.8 million and add to it the $83 million the SEC already spends each year on real estate, the SEC was committing a whopping 15% of its budget to real estate.
2. According to the Wall Street Journal, the SEC’s offices are 2.5x the size that’s the norm for the federal government.
What’s also noteworthy is that this isn’t the SEC’s first office snafu–though arguably the largest. Of the incidents we know about, in 2005-06 it had to cut back on investigations to fund a $48 million cost overrun on office construction expenses. The agency is reported to have paid for years for office space in New York that it wasn’t occupying. Recently, its leasing practices in San Francisco have also come in for criticism.
Where do they get these people?