The Trump administration's recent directive to the General Services Administration (GSA) to significantly reduce federal office leases has sent ripples through the commercial real estate market. This cost-cutting measure, aimed at trimming as many as 300 leases per day, represents a potential shift in billions of dollars of office market value.

According to a new report by KBRA, the current conditions are fluid, and outlooks remain uncertain. The GSA leases account for approximately $28.7 billion of the $350.6 billion principal balance of CMBS and CRE CLO loans as of February 18, 2025. These leases encompass 173.6 million square feet of space across 6,483 buildings and 7,535 leases, predominantly office space.

The impact of this decision is substantial, with about 13.8 million square feet of GSA leases securing 201 loans with an outstanding controlled loan balance of $15.6 billion. This serves as collateral in 195 of 513 KBRA-rated transactions, with an average exposure of 15.2% loan balance. In cases where GSA held leases, they represent an average of 17.8% of the expected loan collateral square footage.