The Trump administration's new watchdog for reducing government spending, the Department of Government Efficiency, known as DOGE, says it has canceled or restructured 98 federal leases covering more than 2 million square feet of space across the country.
DOGE said the cancellations and restructurings will save taxpayers $78.9 million. Leases cut or changed in the Washington, D.C., area accounted for 63% of the square footage and 69% of the cost savings, according to the operation run by tech billionaire Elon Musk.
The new list expands on the reductions DOGE announced on the social media platform X, owned by Musk, saying the General Services Administration ended 22 leases in a decision that would result in a total of $44.6 million in cost savings. The GSA acts as the federal government's real estate manager.
“Most of them were not surprises to me,” Lucy Kitchin, managing director of Transwestern's government services advisory group, told CoStar News in an interview.
The size of the largest lease termination currently on the updated list, a roughly 845,000-square-foot lease in D.C., matches with the size on GSA’s inventory of leases at 2 Massachusetts Ave. NE, which houses the Department of Labor’s Bureau of Labor Statistics.
DOGE says on a newly created website the termination for that space is effective at the original expiration date on May 14.
A spokesperson for the Labor Department referred questions to the GSA. The White House and GSA did not respond to emailed requests for comment.
Proposed cost cutting by the Trump administration has drawn attention to the federal government’s sizeable portfolio of office leases and is now starting to hit landlords across the country.
Office Properties Income Trust, whose largest tenant is the federal government, said the cost-cutting efforts “may be a headwind” for its portfolio, the company said on its year-end earnings call this week.
Yael Duffy, president and chief operating officer of Office Properties Income Trust, noted the firm already anticipates that at least one agency may terminate its lease in the second quarter: the Department of the Interior's Bureau of Safety and Environmental Enforcement.
Office Properties Income Trust said the government tenant leases 110,000 square feet representing $856,000 in annual revenue. The agency is located at 45600 Woodland Road in Sterling, Virginia, according to CoStar data.
Duffy added that DOGE’s efforts are “broad-based and unpredictable,” but that the balance of its leases are believed to be with “mission-critical agencies” with minimal risk of vacating, such as the Secret Service, Veterans Affairs, Social Security and the Department of Justice.
The real estate investment trust did not immediately respond to emailed requests for additional comment.
Easterly Government Properties has at least one property listed among the 98 already canceled. The REIT is losing the National Labor Relations Board as a tenant at 130 S. Elmwood Ave. in Buffalo, New York.
Easterly said in a statement earlier this month that it has spoken to DOGE and provided recommendations on how the GSA can save taxpayer money.
“We stand aligned with DOGE’s efforts and are ready to leverage our expertise to help streamline operations,” Darrell Crate, president and CEO of Easterly, said in the statement.
On Tuesday, an Easterly spokesman told CoStar News in an email the company is “excited to continue working alongside DOGE to deliver cost effective real estate solutions for the federal government. With the Trump administration’s return-to-office mandate, we anticipate our facility will serve as a helpful solution for the government as demand for office space in Western New York continues to grow."
More cuts expected
As of January, leases arranged for federal government entities totaled 174 million square feet, according to GSA data. The federal government is responsible for $5.78 billion in annual rental payments on those leases.
It should be noted some federal government entities negotiate their leases on their own behalf and not through the GSA.
Of the portfolio inventoried by the GSA, the office sector accounts for 92% of the gross leasable area.
There is no formal guidance from DOGE nor GSA as to which leases are or could be affected by reductions. However, there may be opportunities to cut costs in the office lease portfolio based on the average rental rate the government is paying, according to an analysis by Bank of America Securities.
“When we analyzed which leased office space might be most exposed to cost cutting, we looked at how reported rents being paid by the federal government compared to local and regional peer sets,” said Alan Todd, managing director and head of CMBS strategy for Bank of America Securities, in an analysis this month. “We found that, across 20 large U.S. metro areas, the government appears to be paying rates per square foot that are roughly 50% higher on average than is required for other office buildings in the surrounding market. We doubt that the higher rental rates are indicative of property quality, which suggests these assets could potentially draw attention from cost cutters.”
The easiest leases to target for reductions would be leases expiring soon or leases on which the GSA has lease termination rights, according to the bank.
As of January, the GSA had 18.4 million square feet of leases scheduled to expire this year.
In addition, it had 54 million square feet under leases with termination rights that total $1.65 billion in annual rents, according to GSA data.
Landlords to federal tenants are starting to pay attention to the risk in their portfolios from those leases.
DOGE and the GSA “are reaching out to all tenant agencies with non-firm term leases to see if there are opportunities to reduce space usage,” Highwoods Properties said in its annual report filed this month. “We currently have 30 leases with 23 different agencies of the federal government across five different markets, which encompass an aggregate of 737,000 square feet.”
Highwoods said it could not provide any assurances that the federal government would not seek to terminate any of those leases.
Any cuts to federal workers and lease costs could also spill over into other property sectors.
Elme Communities reported this month that it is susceptible to adverse developments from actual or threatened reductions in government operations by federal agencies including DOGE. As of year-end 2024, approximately 75% of Elme’s residential apartment homes, or more than 7,000 units, were in the D.C. metro region.
Amazon developer leases
The impact of the federal government exiting from office space is also testing JBG Smith, the developer behind Amazon's second headquarters outside D.C.
JBG said in its annual report Tuesday that some of its federal tenants have reduced their leased square footage and that the REIT has been notified by a GSA tenant that it’s vacating 88,000 square feet of space this year. JBG said between now and 2029 there are 20 leases totaling about 542,000 square feet with federal government tenants that could expire.
“If demand for federal government office space were to decline, it would be more difficult for us to lease our buildings and could reduce overall market demand and corresponding rental rates, all of which could have a material adverse effect on us,” the REIT warned.
As of the end of 2024, 11.9% of its total revenue was generated by commercial rentals to the federal government, and GSA was its largest single tenant, with 31 leases comprising 25.2% of total annualized rent. That equates to more than 1,479,379 square feet.
JBG declined to comment on whether it’s been impacted by DOGE’s role in lease terminations.