Since the U.S. Department of Government Efficiency (DOGE) announced plans to drastically shrink the federal government’s real estate footprint, details have emerged in phases. While the situation remains loose, the impact on commercial property markets and landlords is becoming clearer.
In February, DOGE revealed plans to cancel nearly 1,000 government leases, primarily office spaces. By March 6, the number dropped to under 750, and as of April 17, 653 leases totaling 7.6 million square feet are now set for termination. The full extent of space to be vacated, including both leased and owned properties, exceeds 15 million square feet.
CoStar has identified 428 of the nearly 750 canceled leases across 380 properties nationwide. Only 2% of this space is in premium five-star office buildings, while 82% is in mid-quality three- and four-star buildings, representing a significant shift in the office market since 2020.
The leases are spread nationwide, with the largest concentration in Washington, D.C. (13%), followed by Atlanta (6%) and Phoenix (5%). While this will have minimal impact outside of D.C., building owners in affected markets, particularly those with lower occupancy rates, could face financial strain.
Around 177 buildings are projected to fall below 75% occupancy, a key distress indicator for properties with outstanding loans. Though the number has decreased since March, landlords—especially smaller ones in less sought-after markets—may face considerable challenges in filling the space.
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