The Trump administration and Elon Musk's moves to aggressively slash the federal real estate portfolio increase the default risk of $12B of loans tied to commercial mortgage-backed securities, according to a new analysis.

Office properties make up 87% of the exposure, and unsurprisingly, the city with by far the most government leases tied to securitized debt is the nation's capital, according to the study from Barclays, which was reported by Bloomberg. In total, up to $28B of CMBS loans are tied to properties where the federal government has leases.

The $12B at risk is tied to just the properties in those portfolios where the General Services Administration, which manages the federal real estate portfolio, has a lease.

Barclays analysts said they are "particularly concerned" about the financial health of Washington, D.C.'s, office market, which has $6B in CMBS debt tied to government leases. Chicago is the city with the second most risk, with $3.8B in CMBS exposure.

New York and Los Angeles both have $3.2B in loans tied to GSA leases, and Arlington, Virginia, a small county across the Potomac River from D.C., has $2.4B of exposure.

GSA-tied loans look particularly vulnerable as the Musk-led Department of Government Efficiency has looked to aggressively reduce the federal government's 360M SF real estate portfolio, which is half owned and half leased.

The GSA's recently appointed Public Buildings Service commissioner, Michael Peters, said at a public meeting last month that there could be a 50% reduction to the federal government’s leased and owned footprint.

While most of the GSA's leases are signed on a long-term basis, the Trump administration can terminate a large swath of leases over the president's second term.

About 52% of the GSA's 149M SF of leased space has expirations or termination options between now and the end of 2028, according to a December analysis of GSA data from S&P Global Ratings.

Last week, DOGE announced the administration has already terminated 22 leases, and The Associated Press reported that the General Services Administration is in the process of offloading 7,500 leases.

President Donald Trump, meanwhile, is continuing to empower DOGE's large-scale cost-cutting efforts. Trump signed an executive order Tuesday requiring agencies to work with the body to shrink their employee base and consolidate or eliminate entire agencies.