This summer, federal agencies are set to vacate numerous offices nationwide as part of Elon Musk’s advisors’ aggressive drive to cut expenses by terminating leases deemed unnecessary. Musk’s Department of Government Efficiency (DOGE) lists these lease cancellations on its website, yet internal documents from the General Services Administration (GSA) reveal crucial dates when such cancellations will take effect. According to these documents, several leases for federal offices and buildings are scheduled to end by June 30, with numerous others to follow over the next few months.
The swift pace of lease terminations has caused concern among different agencies and lawmakers, prompting some to request DOGE to exclude specific buildings from this measure. Agencies like the IRS, the Social Security Administration, the U.S. Department of Agriculture, and the U.S. Geological Survey face numerous lease cancellations. Some lesser-known yet vital services are also affected, including a Bureau of Reclamation office in Boise, Idaho, and a Railroad Retirement Board outpost in Joliet, Illinois.
While lease termination doesn’t always signal closure, as agencies might renegotiate, downsize, or relocate, the uncertainty has been unsettling. Chad Becker, a former GSA official, notes that some agencies strongly oppose vacating their premises, fearing disruption and inefficiency.
The DOGE has recently informed landlords of plans to terminate 793 leases, focusing on those that can be concluded penalty-free in a short time. Their goal is to save about $500 million, but these savings estimates haven’t been independently verified and don’t account for relocating costs. Jim Simpson, an accountant on an IRS taxpayer panel, expresses concern over the chaos such abrupt changes could cause, especially with IRS support centers at risk.
Some errors in lease cancellation plans have added to the confusion. For instance, the termination of certain IRS centers was mistakenly listed and has since been reversed, though not all corrections have been updated on DOGE’s website. Notably, a termination for a Geological Survey office in Anchorage, Alaska, was rescinded due to termination rights errors, says a knowledgeable source.
Representative Tom Cole has successfully persuaded DOGE to reconsider terminations in Oklahoma, yet these leases remain on the cancellation list. Meanwhile, the GSA has remained unresponsive to inquiries.
The real estate industry, long viewed as stable due to government tenure, was caught off guard by these mass cancellations. Landlords, expecting agencies to continue their leases, were surprised when decisions were made independent of agency consultation. Chad Becker anticipates some agencies struggling to relocate swiftly, potentially incurring additional rent costs during the transitional period.
While some agencies, like the IRS, remain silent, a spokesperson for the Social Security Administration minimized the impact, claiming many sites were non-essential or already planned for closure. However, the Railroad Retirement Board voiced concerns about maintaining a presence amidst lease terminations.
At a recent congressional hearing, David Marroni from the Government Accountability Office warned that while reducing unnecessary federal real estate is essential, it must be managed carefully to avoid disruptions. Critics argue DOGE’s current approach diverges from efficient government operation and advise learning from existing GSA methodologies. A law enacted by former President Joe Biden aimed to re-evaluate space utilization by this summer to ensure lease space fulfills a 60% usage rate.
Despite the criticism, the full effect of these cancellations remains to be seen as the situation continues to unfold. J. Reid Cummings, a finance and real estate professor, likened the current blitz of cancellations to a sudden and unexpected disturbance in the market.
