Pricing Policy: How Are Federal Agency Rental Rates Determined?

December 02, 2016

Agency rental rates have many components, and the formulas are different for GSA-owned versus leased spaces.

Federally Owned Space
GSA charges a market-based rate in the best interest of the government, per guidance in the Federal Property and Administrative Services Act of 1949. In GSA-owned space, the shell (basic structure) and operating (building services and utilities) rental rates are typically determined by Fair Annual Rent appraisal. FAR appraisals are performed every five years by an outside appraiser and then reviewed and approved by GSA.

Federal rates can also be based on Return on Investment pricing. ROI pricing may be employed when the FAR appraisal-based rental rate does not meet GSA’s return objective – also known as the hurdle rate – which is currently six percent. The hurdle rate is a measure set so that all GSA assets are recovering the minimum cost of ownership and reinvestment.

Leased Space
Lease rent is a pass-through of the underlying lease contract rent plus any standard operating costs not performed through the lease. GSA also charges a seven percent lease fee to cover administrative costs. The total rental rate must be comparable to the market rate but is also influenced by tenant improvement costs.

Other Rent Components
In addition to shell and operating rent components, agency rent bills may include charges for amortized tenant improvements, joint-use space, parking, security and/or antennas.

More information is available in the GSA Pricing Desk Guide, sections 1.2 and 6.6. Federal agency customers may also contact a Heartland regional account manager for more information.