USPS May Close Over 3,000 Locations Soon
The United States Postal Service is considering consolidation options in every major metropolitan market in the United States. The consolidations could lead to the closure of over 3,000 USPS locations. Clearly, this will have a major impact on the employment of a large number of postal workers. These abandoned post offices will also leave many landlords quite concerned. Government (GSA) leases often contain clauses that allow for lease termination upon certain events (like closure). Most investors probably thought little of these clauses because post offices usually stay open forever so the risk was perceived to be almost nonexistent.
From the article published by CoStar (emphasis mine):
According to USPS records, it owns 8,546 facilities totaling 219.6 million square feet and leases another 25,272 locations totaling 912.2 million square feet. Many, if not most, of those locations are counters in various retail locations occupying less than 1,000 square feet. The consolidations the USPS are studying are for larger locations of a few thousand to tens of thousands of square feet – most of it leased.
………
The effort to consolidate operations at stations and branches "could include possible termination of leases and/or movement of operations from Postal Service-owned facilities… Until the process is initiated and the reviews are completed, we will not know which leases or owned facilities, if any, will be terminated or sold, or the impact on employees."
By law, after the USPS closes a facility in a rented space, it clears out its property and terminates its lease. In the case of owned facilities, after the USPS shutters a property it is to dispose of the excess real property under terms and conditions that provide the greatest value to the Postal Service. Disposition could be by sale, exchange, outlease, sublease, or other means.
So much for buying a recession-proof tenant. If this economic downturn has taught us anything it is that no industry or vertical is immune.
