Publicly traded REITs remain optimistic in the face of potential widespread cuts to federal leasing at the hands of the Department of Government Efficiency. Many of these entities rent space to the government and have large portfolios in Washington, according to a report in the Washington Business Journal.
However, they believe their leases are generally safe, according to statements they’ve made to investors in earnings calls and press releases, according to the article. That is because they serve agencies performing the work the Trump administration is prioritizing, including mission-critical agencies.
The federal government leases nearly 150 million square feet of office space across the country, including 44 million square feet leased by the General Services Administration (GSA) in Washington. Rent payments on these leases total $5.23 billion each year.
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Easterly Government Properties, which owns 9.3 million square feet leased to the government, regularly warns investors in its risk disclosures about its dependence on the U.S. government and its agencies for virtually all of its revenues. Many other publicly traded REITs include a similar warning in their public disclosures.
Easterly collects $311.5 million in annual rent payments on leases that serve tenants including Veterans Affairs, the FBI, FEMA, the FDA and the DEA. Earlier this month, Easterly CEO Darrell Crate expressed enthusiasm about DOGE and its opportunity to address inefficiencies within the federal bureaucracy.
“We have witnessed firsthand how slow decision-making and archaic financial rules have cost the American people significant resources," Crate, a former chairman of the Massachusetts Republican Party, said. "As the government undergoes this transformation, we stand aligned with DOGE’s efforts and are ready to leverage our expertise to help streamline operations, reduce costs, and ensure that taxpayer dollars are used efficiently.”
Office Properties Income Trust is another REIT that counts the U.S. government as its largest tenant. GSA represents 2.4 million square feet of OPI's leased portfolio or $70 million of annualized revenue. Of that, 413,000 square feet is within the term that GSA can terminate without penalty. The company said it expects to take a hit from lease reductions but is hopeful most of its GSA leases serve agencies that will continue to need their spaces, including the Secret Service, VA, Social Security and Department of Justice.
Alexandria Real Estate Equities, which counts biomedical operations among its tenants, is confident the Food and Drug Administration will not slow the pace of drug approvals. The firm also expressed optimism that President Trump’s influence on the economy, including lower interest rates, will positively impact the life science industry.
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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.
