'Pure Chaos': Inside The CRE Fallout From DOGE's Slash-And-Burn Campaign

The race to slash the federal government’s real estate footprint has created a bewildering gauntlet for brokers and landlords that work with agencies. Lurching along for weeks, the effort has resulted in stalled negotiations, stymied commissions and panicked owners. 

As the Department of Government Efficiency and the General Services Administration work to cut up to 50% of the federal government’s 149M SF footprint, CRE professionals have received conflicting messages and invalid lease terminations and are met by communication black holes and bureaucratic knowledge gaps when they seek clarity. 

“It’s unclear in a lot of cases who people should even try to talk to,” a source involved in federal leasing told Bisnow on the condition of anonymity. “It’s pure chaos over there.”

The entities have identified 793 leases for termination so far, totaling over 10M SF and 5.7% of the GSA’s leased inventory, according to a tracker maintained by JLL. However, not all of those leases are definitely going to be canceled. Some termination notices have been rescinded for varying reasons, with The New York Times reporting Monday that GSA was reversing 100 lease terminations.

In a dozen conversations with brokers and owners across the country, Bisnow heard accounts of being left in limbo with no answers.

One large private owner with GSA leases in more than 20 states told Bisnow he was notified of a cancellation of a lease for a Social Security Administration office.

“Then, three or four days later, they said, ‘Oops, nevermind,’” he said on the condition of anonymity. “The reality is GSA has always been dysfunctional. This is just a new dysfunction.”

Hundreds of employees have left GSA in the last month through layoffs or taking “deferred resignation” offers. As such, personnel has changed dramatically, disrupting continuity in negotiations and leaving many owners and brokers unsure where to turn for answers. 

The spotty communication and abrupt changes are a jarring turn of events for those accustomed to the relatively even keel of government leases that have historically flown under the radar. 

In the past, individual agencies have handled their own spaces, according to Arco Real Estate Solutions principal Chad Becker.

“Now, it's GSA looking at the lease portfolio and saying, ‘We don't think you need this space, therefore we're going to send out a termination notice, and you, the agency, have X number of days to vacate.’ So it's GSA, essentially, that's driving the decision to terminate space based on perceived inefficiencies in the lease portfolio,” he said.

With an estimated $12B in CMBS debt threatened by the cuts, landlords already coping with a historically difficult market are feeling the strain.

“It puts more pressure on owners too. I mean, owners are completely freaking out because they’re hearing about this,” the federal leasing specialist told Bisnow.

 Some owners and brokers report that canceled leases weren’t in the so-called soft term, the period after the on-paper term of the lease in which the government has rolling lease termination rights if it gives proper notice to its landlord. Owners are contesting the government's right to cancel some of these leases at this point in the term. 

“Our legal teams are having to parse through it,” one real estate executive with GSA leases in her firm’s portfolio told Bisnow.  

“I’m getting the feeling they’re just blanket sending out lease terminations to see what sticks,” she said. “I almost thought of it as they were intentionally saying, ‘Let’s try. These are complicated leases and landlords may not understand them.’”

The GSA is reviewing its options for building use, including the potential termination of leases in their soft term, an agency spokesperson said via email in response to a detailed list of questions.

“To the extent these terminations affect public facing facilities and/or existing tenants, we are working with our agency partners to secure suitable alternative space. In many cases this will allow us to increase space utilization and obtain improved terms," the spokesperson said.

For brokers who work on commission, it’s throwing a wrench in their business and their bottom line — sometimes when a lease is just a step away from finalization.  

One senior broker in Southern California started working in August 2024 with a federal agency that wanted to move to a smaller office space in its existing building after ending its original lease. The process was going as planned until, in February, the broker received another notice that the original lease was being terminated — this time from the General Services Administration.

The broker, who spoke to Bisnow on the condition of anonymity, sought clarification regarding the new, smaller lease and whether it would proceed.

Weeks later, he’s still in the dark.

“We don't know whether we're continuing to have the smaller version of what we had, or they're leaving entirely,” he said. “We don't know. I'm still in that void.” 

Some in-progress leases for GSA clients have also been upended due to an active pause on signing new leases at GSA. An official with GSA’s Public Buildings Service told Federal News Network there were “very, very few exceptions” to the freeze. 

The pause, first referenced in a January memo signed by acting GSA Administrator Stephen Ehikian, doesn’t have a stated end date.  

"Acting Administrator Ehikian’s vision for GSA includes reducing our deferred maintenance liabilities, supporting the return to office of federal employees, and taking advantage of a stronger private/government partnership in managing the workforce of the future," the GSA spokesperson said.

“We have plenty of leases that are sitting at the finish line, just awaiting government signature, and the government is not allowed to fully execute the lease contract until this acquisition pause is lifted,” Becker said. 

Government downsizing cutting into broker commissions is an extension of a trend that began during the pandemic.

From spring 2020 to January 2025, the demand for federal lease space declined, said Norman Dong, former head of the Public Buildings Service who now works as a broker specializing in federal government leases. 

“What that meant was that you had fewer and smaller lease transactions and if you work on a commission basis, you can do the math, right?” he said. “Sometimes you would have leases that were renewed at 50%, sometimes you wouldn't have leases renewed at all. They just simply let the lease terminate.” 

Despite good relationships with people at senior levels of the GSA, Becker has no insight as to when the acquisition pause might end. 

“You ask that question, and you just get a shrug,” Becker said. “And I don't think people are withholding information. I think people just truly do not know.”

Other owners and brokers reported also being in the dark about the status of unexpected terminations and whether a rescission was coming. 

“We haven't been able to get a hold of anybody over there,” the female real estate executive with GSA leases in her firm’s portfolio said. “It’s been a couple of weeks, but we’re not even sure who to talk to.” 

Bisnow reporters Jarred Schenke and Emily Wishingrad contributed reporting.

UPDATE, MARCH 18, 4 P.M. ET: This story has been updated to include new information about the reversal of 100 lease cancellations as reported Monday morning.