California Government to Trim 132 Office Leases – Commercial Observer

California’s government, one of the state’s biggest office users, is tightening its belt on workplace real estate. 

The state’s Department of General Services (DGS) plans to shrink the office portfolio of 40 departments, which amounts to “132 individual leases, resulting in 1.16 million square feet of office space relinquished and annual savings of approximately $35 million,” according to the 2023-2024 governor’s budget summary. 

This comes after the state government instituted remote work in the wake of the COVID-19 pandemic, and also last year earmarked 767,000 square feet of office space to cut. CoStar first reported on the latest decision. 

DGS did not immediately return CO’s request for comment. 

“Progress continues in reducing the state’s leased portfolio while prioritizing the largest leasing clients to gain the greatest efficiencies,” the summary read. “The state continues greater operational efficiencies through the expansion of telework strategies, reconfiguring office space, reducing leased space, promoting flexible work schedules for employees, and reducing disparities and promoting equity and inclusion in the workplace.”

According to the state’s Legislative Analyst’s Office, DGS manages approximately 36.5 million square feet to support state programs and functions. Of that total, 13.2 million square feet is within 59 state-owned office buildings.

Office leasing and investment are expected to continue declining throughout the U.S. this year. The national office vacancy rate was at 16.6 percent after the first month of the year, up 80 basis points over January 2022, according to a recent report by CommercialEdge. But, while users make major cuts, DGS and California’s government still plan to utilize office space for the foreseeable future.

“While statewide consolidation efforts will continue, the administration recognizes the need for modern office space to conduct the state’s core business functions, and remains committed to investing in the construction and renovation of these assets,” Gov. Gavin Newsom’s budget proposal stated last year. 

Gregory Cornfield can be reached at gcornfield@commercialobserver.com.