- The General Services Administration may reduce its office footprint, potentially cutting over 53 MSF of leased space through 2028.
- By 2034, GSA-leased office space could shrink by more than 63%, slashing annual rent payments by $1.87B by 2028 and $3.4B by 2034.
- Washington, DC, New York City, and Los Angeles would be hit hardest, with major lease terminations impacting 9.7% of the DC office market alone.
- Potential NOI losses could surpass $559M, with office property values facing a $7.4B hit based on current capitalization rates.
The Trump administration is considering major cuts to federal office space, putting billions in US office market value at risk, per GlobeSt. The potential cuts would be the largest in decades, impacting landlords nationwide.
Projected Lease Cuts
The GSA currently leases 149.5 MSF of office space across 2.53K properties, paying $5.25B in annual rent at an average of $35.09 PSF.
If the GSA moves forward with a 5% office footprint reduction in 2025, annual leasing costs would fall by $260M. By 2028, cuts could total 53 MSF, equating to $1.87B in lost rent.
The impact would be even more severe by 2034, with government-leased space shrinking by 63.47% and annual rent obligations dropping by 64.61%.
With an average securitized cap rate of 7.56%, the estimated loss in property value could reach $7.4B.
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Facing The Biggest Losses
The Washington, DC metro area—where the GSA leases 9.7% of total office space—stands to lose the most. Nearly 9.6 MSF could be terminated by 2025, amounting to $384M in lost rent.
Other markets at risk include:
- New York City (NY-NJ-PA): 223 properties, $249M in rent, with 30.68% of GSA-leased space at risk in 2025.
- Los Angeles (CA): 168 properties, 1.36% of the office market, with 34.96% of leased space potentially lost by 2025.
- Philadelphia (PA-NJ-DE-MD): 124 properties, 23.58% of GSA leases at risk, equating to 20.82% of total GSA rent in the market.
- Chicago (IL-IN-WI): 113 properties, 38.39% of GSA space at risk in 2025, equaling 34.16% of the GSA’s rent in the region.
Why it Matters
If these lease terminations proceed, landlords will struggle to replace GSA as a tenant, worsening the already high vacancy rates in major office markets. Many properties leased by the government may require extensive capital improvements or repositioning to attract new tenants.
With office demand still recovering, these potential cuts could accelerate distress, putting billions in property value and rental income at risk. Market disruptions are expected in DC, NYC, and LA unless new demand sources emerge.
