As DOGE Ends Federal Leases, It Also Hinders Office Recovery

The Trump administration’s plan to cut federal leases and sell buildings could stall the office market’s recovery, particularly in DC.

February 25, 2025

Jordan B.

With the blessing of the Trump administration, DOGE is ending nearly 100 federal leases and may sell two-thirds of vacant government buildings.
Washington, DC, faces the biggest impact, with 11 leases totaling 1.4M SF targeted in the first wave of cuts.
Other cities with a large federal office presence—New York, Los Angeles, and Atlanta—could also see higher vacancies.
Analysts warn the cuts could prolong the office market downturn and stall rent recovery. Ironically, the move counteracts the positive effects of federal return-to-office mandates.

Key Takeaways

The recovering US office market is facing a new challenge as the Trump administration continues to cut federal office space, according to WSJ.

Under Elon Musk, the Department of Government Efficiency (DOGE) is already making waves with its massive shakeup of the GSA, with experts wondering which agency is next at the chopping block.

Ripple Effect

Nearly 100 federal office leases have been targeted for termination by DOGE, with Washington, DC, facing the biggest wave of early terminations—11 leases totaling 1.4M SF, per a Barclays analysis.

The District’s office market, already reeling from a nearly 23% vacancy rate last year, had just begun to stabilize. Analysts think these lease cuts could reverse gains, particularly as older government-occupied buildings continue to struggle to attract replacement tenants.

Hardest-Hit Metros

While D.C. is the primary focus of DOGE’s ire for now, other cities with a heavy federal footprint—New York, Los Angeles, Atlanta, and smaller hubs like Hagerstown, MD, and Martinsburg, WV—could also take some serious hits.

These regions host major government agency offices that, if vacated, could struggle to find new tenants, especially in older or specialized buildings that lack broad commercial appeal.

Ohio, home to the second-highest concentration of targeted federal leases (at the moment), may see increased office vacancies as well.

With 10 leases already on the chopping block, analysts warn that a prolonged downturn in secondary markets could worsen local economic challenges, particularly in areas where government jobs and leasing activity have long been stabilizing forces.

Why It Matters

DOGE’s ongoing federal lease terminations threaten to prolong the office market downturn, keeping vacancy rates elevated and stalling rent recovery. If DOGE accelerates its cost-cutting efforts, landlords with many federal tenants—especially in DC—could face mounting financial pressure.

While federal return-to-office mandates helped drive positive absorption in some markets, analysts caution widespread government downsizing will more than offset those gains.

Unfortunately, markets that were beginning to see signs of stabilization—particularly in DC and other government-heavy regions—are already facing an influx of soon-to-be vacant space. For older buildings, higher vacancies would make refinancing very difficult.