When Elon Musk and Vivek Ramaswamy promised to go into demon mode on D.C. office, everyone in real estate paid attention. Within weeks of Donald Trump’s election victory, property owners and brokers were reading up on presidential advisory commissions and their potential power to shrink the federal government’s office footprint.
“Federal government agencies are using, on average, just 12 percent of the space in their DC headquarters,” the account for their proposed advisory commission, Department of Government Efficiency, posted on X in late November. The figure came from a report by the Public Buildings Reform Board. “Why are American taxpayer dollars being spent to maintain empty buildings?”
Musk and Ramaswamy want to drastically reduce regulations, and since Nov. 6, they have been proclaiming across social media, in newspapers and on TV their mandate to cut government waste.
Less regulation means government agencies need fewer employees for enforcement, and therefore, less office space. At the same time, Trump and DOGE want federal employees to stop working remotely and return to their offices.
Both could have major implications for the office market in Washington, D.C., as well as other cities with lots of civic workers, like Atlanta, Chicago and Dallas.
The federal government owns and leases more than 363 million square feet of space across the country. It’s the biggest tenant in the Washington, D.C., area, where it controls about 26 percent of the market.
It’s hard to imagine Musk-style management actually coming to government affairs. But many developers and brokers said they’d welcome a pro-business, private-sector approach to fixing inefficient bureaucracy and would deal with the real estate fallout as it comes.
“The government needs to get bigger as the population gets bigger, but it should always be trying to get more efficient and more productive,” Darrell Crate, a D.C. landlord, said. Crate’s D.C.-based Easterly Government Properties leases about 9.8 million square feet across the country to the federal government.
But others are concerned that an Elon in demon mode might go too far and make cuts detrimental to city centers still stinging from remote work.
Still, anything Musk or Ramaswamy could do to make the government resemble the commercial real estate market would be “outstanding” and would “waste a lot less of everybody’s time,” Crate added.
Office space
You don’t have to be a billionaire with an efficiency algorithm to see why the belt-tighteners would target municipal offices: The federal government’s workspaces are largely empty and underused.
Many are in older buildings constructed before air conditioning. Think long hallways of offices built around courtyards — not the large, open plans of modern corporate life.
The Government Accountability Office did a study in early 2023 about how rarely workers were in the office, finding that 17 out of 24 agencies reviewed were using just 24 percent of their space during a three-week sample period in January, February and March. Agencies on the higher end of the range were using only 39 to 49 percent.
There are lots of different reasons for this. Some agencies are in such large, government-owned buildings that they have never used all the space available to them. Most agencies are remote. And of course, there are politics involved: Department heads covet prime real estate that confers status even if they don’t actually need that space to do their jobs.
“The economic spur we will see from the new administration will have a major impact (in a good way) on office absorption here in DC regardless of the federal government’s office contraction plan.”
“At a meeting of the Federal Real Property Council in January 2023, more than half of the agency officials in attendance acknowledged that their headquarters buildings had excess space prior to the pandemic,” the GAO’s report read.
Trump has said he wants to make government employees return to their offices, but he faces pushback. The American Federation of Government Employees said in December that it would fight any mandates from the Trump administration to return to the office. The same month, President Joe Biden finalized a contract for 42,000 Social Security Administration employees to work remotely through 2029.
Paul Walden is the executive director of the Public Buildings Reform Board, which was created in 2016 to identify opportunities to cut real estate and save money. He said it’s been tough collecting data on office usage, as some agencies don’t track attendance and others do so in a haphazard way.
The board is getting ready to make a report of recommendations on which spaces could be cut. In the meantime, Walden said he’s getting his info on DOGE the same way everyone else is, from social media posts and news.
Once the Trump transition team gets in place, he expects to hear more.
“I expect to get some interest from the DOGE team,” he said.
Shrinking footprint
Walden’s eight-year-old board is not the only evidence that Uncle Sam has been on an office-cutting binge for more than a decade. The General Services Administration began trimming its footprint under the Obama administration in 2012.
Back then, it leased just shy of 200 million square feet across the country.
By 2023, the agency had shed 21 million square feet, according to Colliers.
The downsizing was particularly noticeable in the capital region, which accounted for 59 percent of the cuts. Leased office space went from about 59 million square feet down to just shy of 47 million.
“The existence of so much federal space in the nation’s capital has made it easier for GSA to shift agencies and consolidate leases into federally owned buildings,” Colliers wrote.
Cities with large concentrations of federally leased space, from Atlanta to Denver, also felt it.
The GSA’s efforts increased during and after the pandemic.
Musk and Ramaswamy said that a drastic reduction in federal regulations meant “mass headcount reductions” across the federal bureaucracy.
“DOGE intends to work with embedded appointees in agencies to identify the minimum number of employees required at an agency for it to perform its constitutionally permissible and statutorily mandated functions,” the two wrote in an op-ed in the Wall Street Journal in late November.
They said they would help employees who lost their jobs to take early retirement or transition into the private sector. But they expect a large number will choose to find work elsewhere.
“Requiring federal employees to come to the office five days a week would result in a wave of voluntary terminations that we welcome: If federal employees don’t want to show up, American taxpayers shouldn’t pay them for the Covid-era privilege of staying home,” they wrote.
Waste not
Reactions are mixed on what the Trump administration’s policies will mean for real estate.
Matthew Jemel of Douglas Development Corp., one of D.C.’s biggest landlords, said he expects downsizing public departments to be a boon to private sector growth.
“The economic spur we will see from the new administration will have a major impact (in a good way) on office absorption here in D.C. regardless of the federal government’s office contraction plan,” he wrote in an email.
Easterly Government Properties’ Crate said he thinks his company’s biggest tenants — the Federal Bureau of Investigation, Veterans Affairs, Drug Enforcement Administration and Food and Drug Administration — are protected because they do mission-critical work and have been growing their leases in recent years.
Easterly’s stock price has fallen about 14 percent since Trump’s election victory.
Meanwhile, D.C.’s office vacancy rate stood at nearly 23 percent in the third quarter, according to CBRE.
Avison Young CEO Mark Rose, who is a member of the Real Estate Roundtable, said his group has advocated for the return to office, noting that the local municipality of Washington has a gaping hole in its budget due to the reduced value of office buildings.
He said he hopes that DOGE’s work targets real waste and that it’s important to work with local communities to make sure their economies can sustain the downsizing.
“I think Musk working on waste is awesome,” he said. “Anything that takes people out of cities right now, I don’t think is awesome.”
—Judah Duke contributed to this article