Did I get your attention? Good, because GSA lease’s just automatically renewing is a common misconception I keep coming across as I work to engage new clients. Yes, there are of course exceptions to this general statement, but they make up a very small percentage of new GSA leases. And no, the fact that you have a “great” building and the GSA tenants keep telling you they want to remain in place is NOT one of these renewal exceptions.
Now that we have made it clear that your GSA lease will not be renewing automatically, and that you will be competing to keep your GSA tenant, let’s talk about what to expect as your GSA lease approaches expiration.
- GSA will likely begin working with your tenant 36 months prior to expiration to develop new requirements.
- 12 to 24 months out, GSA will publicly advertise your tenant’s requirements to develop market awareness and bring in competition. Yes, they WANT others to compete against you and will actively pursue competition.
- Once contacted by GSA, you will need to either express interest or input your GSA lease offer in their new AAAP application (more on this later)
- At this point, you have entered the competitive portion of the procurement.
So how is GSA going to procure this lease requirement? Well, GSA now has three options:
- In-house labor – For this procurement method, you will work directly with GSA employees only. This is the “traditional” process where you will read a ton of GSA leasing documents, fill out several forms that probably don’t make much sense, and ultimately cross your fingers and hope for the best. (Yeah…. this is kind of what it feels like)
- GSA Leasing Support Services Plus (GLS+) – Basically the same as above, but instead of working directly with GSA employees you will mainly be working with one of their broker partners.
- Finally, GSA could use its relatively new AAAP tool (Automated Advanced Acquisition Platform). This is a great new tool where you input only the pertinent details of your offer in to an online database, and should you be selected as the “lowest-priced offer”, GSA will then and only then ask you to complete the remaining GSA leasing paperwork. It’s much easier to tolerate the additional paperwork when you know you have already won the competition. You will see this program growing in use around the country due to its popularity amongst building owners and GSA leasing staff. If you have questions about GSA AAAP, learn more with Arco today!
So, let’s say you are the incumbent lessor, you have participated in the competition, and you were just notified that you have been selected. Congratulations!
That said, hopefully, you read the latest version of the GSA lease which is constantly being updated, and are aware of the lease changes and potential building upgrades you are now obligated to perform. And more importantly, hopefully, you priced these new or increased standards into your offered Shell and Operating rates.
- Do you meet the current accessibility standards (ABAAS)?
- Do you have 3-phase power running to your building?
- Do you meet the current power standards (watts/ABOA SF)?
- Did GSA establish the tax base based on known historical data or are they relying on the Real Estate Tax Clause to establish the base which can harm you as an incumbent lessor?
- Will you be performing tenant improvements for this new lease term? If so, hopefully, you accounted for DIDs and demolition. Yeah, both are Shell costs and NOT tenant improvement costs.
- And the list goes on….
In conclusion, I will simply restate the title of this article. Do GSA Leases Renew? No, your GSA Lease will not be simply “renewed”! You will be competing to keep your GSA tenant.
Please, for your own sake, either read and make sure you understand everything that GSA will require of you, or hire an expert to guide you through the current GSA RLP and Lease models as well as GSA’s ever-changing procurement methods. And no, your listing agent who has “done a GSA deal before” and by all accounts is an outstanding broker, is NOT a GSA expert. But that’s another article for another day…
Needing assistance with navigating the GSA lease procurement process? You can reach me, Chat Becker, at:
Phone: (702) 626-5202
Email: chad@arcoresolutions.com
Contact Form: https://arcoresolutions.com/contact-us/
Chad worked in federal real estate at the GSA and the U.S. Navy for over 15 years. As Principal of Arco Real Estate Solutions, he now assists building owners and brokers obtain and maintain leases with GSA and other Federal Agencies. When he is not using his expertise in this niche industry to assist his clients, he serves as an instructor for the very classes GSA requires for its leasing employees.