(HAF) Leasing of Administrative and Warehouse Space to Department of War.pdf

DEPUTY SECRETARY OF WAR

1010 DEFENSE PENTAGON

WASHINGTON , DC 20301-1010

SEP 3 0 2025

MEMORANDUM FOR SENIOR PENTAGON LEADERSHIP

DEPARTMENT OF WAR AGENCY AND DOW FIELD ACTIVITY

DIRECTORS

SUBJECT: Leasing of Administrative and Warehouse Space to Department of War

I am concerned about the costs of Department of War (Do W) leases for administrative and warehouse space. Although a review of over 300 administrative and warehouse Do W leases and General Services Administration (GSA) Occupancy Agreements (OAs) found most are priced within local rates, there are several areas where Do W is in high-cost leases (those that exceed local market rates). To protect the taxpayer, our goal should always be to pay no higher than market rates. Therefore, in addition to the other real property and lease cost reduction reforms underway, I am directing that:

• Lease and OA costs for new administrative and warehouse leases are limited to paying no more than the local market rental rate for comparable properties (based on current commercial real estate listing sources, i.e. , CoStar, LoopNet, etc.) within a 10-mile radius of the desired location. Market rental rates are based on rent, operating expenses, and any tenant improvement allowance but will exclude costs related to additional physical security requirements for Sensitive Compartmented Information Facility or Special Access Program space.

• Do W tenants, through their responsible real estate contracting officer, shall use best efforts to renegotiate their existing above market rate administrative and warehouse leases and OAs to a rate at or below the local market rental rate. Efforts shall include assessing the willingness of the landlord to lower rental rates as an alternative to terminating the existing lease and relocating to a lower cost option.

• New administrative and warehouse leases and OAs for Do W are exempted from the requirements of the Do W Unified Facilities Criteria but must comply with applicable federal law, Interagency Security Committee security standards, local municipal fire code, and occupancy data collection requirements (e.g., badge/swipe access systems).

• A moratorium is imposed on new Do W leases and GSA OAs for leased administrative and warehouse space in the National Capital Region (NCR).

• For a period of 12 months, the Under Secretary of War for Acquisition and Sustainment is authorized to waive the NCR moratorium and the market rental rate for new administrative and warehouse space up to 125 percent of the local market rental rate if such a waiver is determined to be in the best interest of the Department.

OSD005613-25/CMD010375-25

The Department will continue to identify opportunities to improve our management of real property leasing operations and reduce costs to responsibly meet the needs of the warfighter.