More Than Half of Federal Office Leases Vulnerable to Cuts by 2028
About 77.7M SF of the government’s leases are set to expire or have termination options by the end of 2028
By Nick Trombola December 11, 2024 4:14 pm
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Turns out Elon Musk and Vivek Ramaswamy may have an even easier time cutting the size of the federal government than previously thought.
Some 52 percent of the federal government’s office leases nationwide are set to expire or have termination options by the end of 2028, according to a recent report by S&P Global Ratings. That cumulatively amounts to about 77.7 million square feet — 59.2 million of expirations and 18.2 million of termination options over the next four years — of the nearly 150 million square feet the government currently uses across about 7,000 separate leases.
The total cost of the 7,000 leases is about $5.5 billion per year, with the average lease over the past 10 years extending about 21,000 square feet, per S&P. The chance to cut that by more than half is potentially inspiring news for the heads of the newly formed non-government Department of Government Efficiency, or DOGE for short.
“With many office markets grappling with higher vacancies, we believe this corner of the market is worth keeping an eye on, as potential spending cuts on leases could work to reduce demand and increase availability, exacerbating the challenges already facing the office sector,” the S&P report said.
Representatives for the General Services Administration, which manages the federal government’s real estate portfolio, did not immediately respond to a request for comment.
The government’s current footprint of leased space is already down 18 million square feet from the 167.4 million it was using less than 10 years ago, per S&P. That downsizing has happened systematically since 2013, in an effort to reduce cost and improve efficiency. The federal government has also shed about 11 million square feet of its owned space within that same time. The GSA just last week targeted eight more federally owned buildings, totaling 1.5 million square feet, to sell, exchange or transfer.
But the extent of the lease cuts that could potentially be made by 2028 is another beast entirely, and there appears to be appetite in the incoming Trump administration to take advantage.
Although the new administration has not yet explicitly commented on how it would approach reducing the government’s portfolio, President-elect Donald Trump has often maligned federal bloat. As part of his agenda, Trump plans to “overhaul federal departments and agencies,” according to his website, with agencies like the Department of Education and FBI publicly in his crosshairs. Trump has also discussed moving tens of thousands of federal workers outside of Washington, D.C.
Then there’s Musk and Ramaswamy, who have publicly stated their intentions to slash federal workforce jobs. Though it’s currently unclear how DOGE will operate, or if it plans to accelerate the government’s trend of consolidating offices, Musk has previously said he wants to cut $2 trillion from the federal budget.
“This will send shockwaves through the system and anyone involved in government waste, which is a lot of people,” Musk said in November.
Nick Trombola can be reached at ntrombola@commercialobserver.com.
