Federal rent is not quoted the way commercial rent is quoted. A commercial landlord states a number per square foot and negotiates from there. A federal offeror builds rent from defined components, amortizes them on defined terms, and gets evaluated on present-value math that most first-time offerors do not understand until it costs them an award.
This is the mechanics of it: the components you price, the amortization rule that quietly decides whether you make or lose money, and the comparison method that picks the winner.
The four components of federal rent (plus parking)
GSA rent is built from four priced components plus parking. You quote them separately, you keep each one clean, and you do not mix costs across them. Mixing is prohibited, and GSA evaluates rent-element realism, meaning each component has to be supported and consistent with market norms.
Shell rent. This is the building itself: the complete enveloping structure, the base building systems like HVAC, plumbing, and electrical, and the finished common areas adjoining the tenant's space. The shell rate includes property financing (exclusive of tenant improvements and security costs), insurance, taxes, management, profit, and base-building and common-area buildout. What it must not include: any tenant improvement costs or any Building Specific Amortized Capital costs. Shell is the building and nothing more.
Operating costs. The recurring costs of running the building: utilities, cleaning, maintenance, and the like. You price them from your Form 1217, the Lessor's Annual Cost Statement: the annual cost of services and utilities divided by the building size. The Government's default is a fully serviced lease, so operating costs sit in the rent and you are responsible for the services. Here is what first-timers miss: the figure you state on the 1217 becomes the base for annual escalation adjustments over the life of the lease. More on that below, but understand now that this number matters far beyond year one.
Tenant improvements (TI). TI takes the space from shell to finished, usable condition: the finishes and fixtures that make it the tenant agency's space. TI is stated as an allowance in dollars per ABOA square foot, amortized at a stated interest rate over a stated term, and expressed as annual rent per square foot. Two critical rules. First, the TI buildout must include all of your costs: administrative costs, general contractor fees, subcontractor profit and overhead, your project management fee, and architectural and engineering design costs. Second, no shell costs may appear in TI pricing. The boundary between shell and TI is enforced, not advisory.
Building Specific Amortized Capital (BSAC). BSAC covers security countermeasures: the physical security investments required by the Facility Security Committee under Interagency Security Committee standards. It is funded through the lease as a separate capital investment, not included in shell rent and not included in the TI allowance. The RLP templates carry placeholder estimates by Facility Security Level: $12 per ABOA SF for FSL II, $25 for FSL III, and $40 for FSL IV. If the BSAC amount would push the rent above the high end of the market, GSA reduces the BSAC figure and funds the difference through a reimbursable work authorization instead.
Parking is priced per space per month, with structured and surface parking priced separately, and included in or added to the rent as the RLP directs. Total annual rent is the sum: shell plus operating plus amortized TI plus amortized BSAC plus parking. Where you offer free rent, it covers all components.
The amortization trap that decides your margin
Under allowance pricing, the RLP states the TI allowance per ABOA SF. You finance the full buildout to the Government-approved design intent drawings, and any overage above the allowance amortizes into the rent through the lease's Tenant Improvement Rental Adjustment clause. Under turnkey pricing, you price the TI as a fixed amount, either pre-award after a design workshop with the agency (the price becomes fixed and amortizes over the firm term) or based on an agency requirements package.
Think about what that means in practice. If you spread two million dollars of improvements over 20 years on a lease with a 10-year firm term, and the Government walks away at year 10, the remaining unamortized balance is your loss. This is not a theoretical risk. It is the single most expensive misunderstanding in landlord pricing. Either amortize to the firm term, or price the risk of the longer amortization into your rate with your eyes open.
Two related points. Your architectural and engineering design fees and your project management fee are stated separately on the Form 1364, computed as a percentage of the TI allowance plus BSAC, and added to the evaluated amortized TI and BSAC rent. They are not free; they flow into the evaluated price. And amortized TI and BSAC may not exceed the high end of the market; over-market amortization fails the reasonableness review.
How GSA actually compares your price: present value
This is the part most landlords get wrong. GSA does not compare your nominal rent. It compares the annual price per ABOA square foot, including all required option periods, reduced to a composite present-value cost per ABOA square foot. Here is the mechanics, step by step:
- The denominator. Parking and wareyard areas are excluded from the square footage but not from the price. Your per-ABOA-SF price is total annual rental divided by total ABOA SF, excluding those areas. The Government verifies your ABOA SF and converts rentable prices to ABOA prices, so get the measurement right.
- Free rent is evaluated in the year it is offered. The gross annual price is adjusted for the free-rent year.
- Commission credit, if any, is subtracted from the first year's gross annual rent before discounting. Note that whether a commission credit is even available depends on the procurement, so check the RLP's broker exhibit rather than assuming.
- Discounting. Without annual operating-expense adjustments: gross annual price minus commission credit, discounted annually at 5 percent, gives the gross present value cost. With operating-expense adjustments: annual price minus commission credit minus the base cost of operating expenses, discounted at 5 percent, gives the net present value cost; then operating expenses are escalated at 2.5 percent compounded annually and discounted at 5 percent, and added back to give the gross present value cost.
- Additions for an apples-to-apples comparison. Several items are added to the gross present value: the cost of Government-provided services for less-than-fully-serviced offers, separately charged parking, the A/E design fees and lessor's project management fees computed as a percentage of TI plus BSAC, and other items at the contracting officer's discretion.
The sum, divided by ABOA SF, is the present value cost per ABOA SF: the price figure of merit. That is the number that decides the award. The practical consequence: back-loaded rent, the timing of free rent, option-period pricing, and your A/E and PM fee percentages all change the evaluated number. Price to the evaluation, not to the nominal rent.
Your price keeps moving after award
Two adjustment mechanisms operate over the life of the lease, and both reward careful setup at the proposal stage.
Operating cost escalation. The negotiated Form 1217 sets the base rate. From the second year on, on each lease anniversary, you receive an adjustment for the increase or decrease in the Consumer Price Index versus the base-year index. Adjustments can be negative if the CPI falls. The contracting officer is instructed not to routinely modify the base cost after award; re-baselining requires lessor consideration, tenant-agency agreement, 18 months of budget notice, and a written amendment. The base you negotiate on the 1217 is, for practical purposes, the base you live with. Price it honestly. A low-balled base saves you nothing and costs you every year.
Real estate tax adjustment. Base year taxes means the real estate taxes for the first 12 months coincident with full assessment, or a negotiated amount. Each tax year after the base year, the Government pays its share of tax increases and receives its share of decreases. You submit the tax records; the Government relies on them to establish the base. Nail the base year, the amount, and the Government's percentage of occupancy in the amendment, because ambiguity here has killed deals. You also have an affirmative duty to disclose tax decreases and provide tax records annually.
What "gsa lease rates" actually depends on
If you came here searching for going rates, here is the honest answer: GSA policy is to enter leases only at rents consistent with prevailing community scales. There is no published rate card. The rate you can win at is a function of your market, your building's efficiency, your TI and BSAC amortization structure, and how the present-value math treats your offer. Landlords who chase a rate number are pricing blind; landlords who understand the evaluation mechanics know exactly where their offer sits before they submit it.
Federal leases are not won on the rent line. They are won on the amortization structure, the operating-cost base, and the present-value arithmetic that the other offerors never bothered to learn.
This is general educational content about the public federal leasing process. It isn't legal advice, and requirements vary by solicitation - always read the actual RLP.