One in Ten Government Leases Axed: What DOGE’s Cancellations Mean for CRE

If you thought the private sector’s struggle with empty office towers was bad, imagine what happens when the federal government—one of the largest tenants in the country—starts slashing leases.

With 18.4 million square feet of government leases set to expire this year under scrutiny from DOGE,
Elon Musk’s new Department of Government Efficiency—and billions in rental income on the line—landlords are facing a brutal reality: their most stable tenant is no longer a guarantee.

But as always, there’s more to the story.

This shift isn’t just about vacancies. It reveals just how much capital is trapped in outdated, bloated portfolios that no longer align with modern workplace needs.

Large-scale tenants have been cutting into their portfolio and right-sizing their footprints for years. It’s about time that the federal government is finally following suit, but the implications for the commercial real estate market are massive.

A new age of lean, optimized portfolios is here—and tenants who fail to adapt are overpaying.

Read on to learn:

• How 800 government leases were cut in two weeks
• Why the government is finally aggressively cutting office space
• How much the government was overpaying for office leases
• How to pinpoint weaknesses in your own portfolio

Rapid Pace of Lease Cuts

The government’s lease purge is accelerating at a breakneck pace.

It started with 97 lease cancellations, but within two weeks, that number exploded to 254—wiping out 3.8 million square feet and slashing $114.7 million in annual rent. Then came another wave, bringing the total to 440 leases and $171 million in savings.

Now, DOGE is in full-blown attack mode. Elon Musk, chair of the initiative, made it clear on X:

And the cuts keep coming. Since Friday, DOGE has doubled down, terminating 500 more leases, eliminating one in 10 active federal office leases, per CoStar News.

By early Monday, DOGE’s website showed 748 terminations, wiping out 9.6 million square feet and $660 million in lease savings—an all-out reckoning for federal office space.

Right-Sizing Government Footprint

With a businessman in the White House and entrepreneur Elon Musk spearheading the Department of Government Efficiency (DOGE), federal spending is facing a corporate-style crackdown.

And if the government is being run like a business, expect ruthless cost-cutting—because after all payroll, real estate is the biggest target.

If the country is being run like a business, costs will be cut like a corporation trying to trim fat... And what is the most significant cost for a business behind payroll? Real Estate.

We already saw over half of the world’s largest companies right-size their corporate footprints. By taking a critical look at their portfolios, they found as a whole they were dramatically overpaying and overleasing space.

And the government as a tenant is no exception. According to Alan Todd, managing director and head of CMBS strategy for Bank of America Securities, in an analysis this month,

Overpaying by How Much?

The takeaway here is twofold, with our unfortunate poster child being the American government:

1. Your unchecked leases are draining your portfolio more than you realize.

If you signed a lease in the pre-pandemic office market, it’s overdue for a revisit. The demand for corporate space swung in favor of the landlord, without the record high vacancies and oversaturation we see today. If you haven’t revisited your lease, you’re still paying for a rate set in a completely different economic landscape—plus a decade’s worth of rent escalations.

On top of that, your space needs have likely changed. Companies across industries have downsized, adopted hybrid work models, and reassessed their footprints. But if your lease hasn’t caught up, you’re paying for square footage you no longer need at a price point that’s no longer competitive.

2. Your biased broker is costing you more than you realize.

Having a broker who prioritizes your interests can make all the difference, especially since the structure of a deal can have long-term financial consequences.

In this case, for the buildings the government owns the government’s broker is also the landlord (shocker) because the General Services Administration (GSA) plays a dual role in government leasing—acting as both the landlord and the leasing agent for federal agencies. This setup creates a clear conflict of interest, where the entity responsible for negotiating the best deal for tenants also benefits from higher rents.

Even though it doesn’t seem legal, this kind of conflicted service is not uncommon in commercial real estate, and it always comes at the expense of the tenant. For businesses, these firms usually go by the term “corporate service brokers” that have departments for both landlords and tenants with a thin veil of separation. Read more about that here: What is a True Tenant Rep and What to Avoid. 

Of course, the GSA sometimes contracts private brokerage firms to assist with lease acquisitions, negotiations, etc. In the past, they've awarded leasing contracts to several major brokerage firms, including:

• JLL (Jones Lang LaSalle)
• CBRE (Coldwell Banker Richard Ellis)
• Cushman & Wakefield
• Savills

With this context, it's no wonder why the leases were far overpaying. None of these firms are
True Tenant Reps. 

Need a good True Tenant Rep? We know a guy. 

What Can Tenants Learn from DOGE’s Lease Purge?

For tenants, the takeaway is simple: if the most bureaucratic, slow-moving tenant in the country can aggressively cut dead weight, why aren’t you?

Your portfolio has weak points, and if you’re not actively targeting them, you’re overpaying. But where do you start? The easiest leases to evaluate like DOGE are:

• Leases Expiring Soon: The GSA had 18.4 million square feet of leases set to expire this year. If a lease is nearing the end of its term, this is your chance to renegotiate, downsize, or walk away from a bad deal.
  
  
• Leases with Termination Rights: The government had 54 million square feet of leases with termination clauses—worth $1.65 billion in annual rent. If you have early termination rights built into your lease but haven’t exercised them, why not? In today’s market, it’s a liability to keep an outdated lease simply because it’s easier than renegotiating.

The Government: Landlords’ Most Reliable Over-Spender

For decades, government leases were one of the safest bets for landlords—and for good reason.

• The average government lease lasts 14 years, compared to 5–10 years for private sector tenants.
• They pay premium rents, rarely renegotiate, and operate at a bureaucratic pace that favors landlords.
• In total, the federal government is responsible for $5.78 billion in annual rent payments.

This guaranteed overspending meant landlords could count on the government to keep cash flowing—even when private sector tenants pulled back. But with DOGE slashing leases at an unprecedented rate, that safety net is disappearing fast.

Some—(cough, cough, Amazon’s developers)—are warning that these lease cancellations will hit local economies hard. This is particularly true in D.C., where 45% of all cuts—1.69 million square feet—were concentrated. The pullback could lead to:

• Increased office vacancies
• Reduced property values
• Lower tax revenues for cities that relied on these government leases

But here’s the irony: the same government that helped prop up landlords with bloated, overpriced leases is now accelerating their collapse. And now that the rug is pulled out from under them, just because the government has become a crutch for landlords doesn’t mean it’s the taxpayer’s problem.

But to play devil’s advocate—speeding up the demise of landlords could leave:

• Struggling landlords default on their non-recourse loans, leaving banks to absorb the hit.
• Banks, already exposed to massive commercial real estate losses, face mounting distress.
• And if enough banks start failing? The government—the same one that triggered this mess—may have to step in with bailouts.
  
  

What Does DOGE Mean for Commercial Real Estate?

The government’s lease pullback is just the latest blow to a market already in crisis. While it’s easy to focus on how this impacts landlords, the real takeaway is what it signals for tenants: Even the biggest, most reliable office occupier is cutting costs and walking away from space.

For corporate tenants, this is a wake-up call. If the government is slashing its footprint, why aren’t you?

• Pinpoint your portfolio’s weak spots—leases nearing expiration and underutilized spaces should be first on the chopping block.
• Exercise termination rights—these are built into your lease for a reason. Use them before market conditions force you into bad deals.
• Renegotiate aggressively—landlords are in no position to play hardball. Demand better terms, more flexibility, and lower costs.

The office market is shifting fast, and waiting to act will only leave you trapped in expensive, outdated leases. Don’t let landlords’ problems become yours.

For a deeper dive into cost-cutting strategies, lease renegotiation tactics, and survival moves for the office downturn, download "Surviving the Office Apocalypse" now.