Around $12 billion of loans tied to commercial mortgage bonds may be at risk as a result of the Department of Government Efficiency’s (DOGE) plan to cut federal spending by streamlining the government's real estate footprint. This is according to a Barclays PLC analysis reported by Bloomberg.
Within just a week of the start of cost-cutting action, leases on 22 properties have been canceled as more than 7,500 federal government leases come under scrutiny for possible closure. CMBS loans with exposure to General Services Administration (GSA) leases are at an increased risk of default, Bloomberg reported. Up to $28 billion of CMBS loans share an address with a property on the government’s leased property list, of which $12 billion is allocated on a property level.
Office properties are the most exposed at 87%, according to Barclays. Meanwhile, Washington, D.C., is the most exposed city to government leases with just over $6 billion. The nation’s capital is already contending with a 17.2% vacancy rate, the Bloomberg report said.
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Other markets with high CMBS exposure include Chicago at $3.76 billion, New York at $3.24 billion, Los Angeles at $3.22 billion and Arlington, Virginia, at $2.4 billion.
Managers at the GSA reportedly have been told to eliminate up to 300 leases per day. The GSA is an independent agency that manages property for various agencies, including procuring workplaces for more than 1 million federal civilian workers. The agency owned or leased more than 363 million square feet of space in nearly 8,400 buildings nationwide as of fall 2024.
Observers have been carefully watching the activity of Elon Musk, who leads DOGE, including a recent visit to GSA headquarters in Washington that kicked off speculation about imminent real estate right-sizing activity.
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Kristen Smithberg
Kristen Smithberg is a Colorado-based freelance writer who covers commercial real estate, insurance, benefits and retirement topics for BenefitsPRO and other industry publications.
