A major federal agency is shrinking its Alexandria headquarters campus substantially, a cost-saving move that will put a sizable dent in the city's office market.

The U.S. Patent and Trademark Office has renewed its lease for five years but handed back two of the five buildings it leases from LCOR, the Washington Business Journal reported Friday. The move reduces the USPTO's footprint from about 2.4M SF to 1.6M SF.

The renewal, which goes into effect August 2024, is the latest sign that the federal government remains committed to its plans to reduce lease obligations. That's a disappointment for D.C.-area office owners who have long counted on the federal government as a stabilizing presence in the market.

Transwestern Managing Director Lucy Kitchin, speaking at a Bisnow event in September, said the slow return to office from federal agencies will likely lead to lease footprints shrinking.

“Anyone who deals with federal real estate or pays attention to it is hearing the constant refrain of reduction, reduction, reduction,” Kitchin said. “There’s a sense there’s been a disproportionate amount of federally leased space empty in D.C. versus the rest of the market. This is why we care about if the feds are coming back to D.C.”

The USPTO is a big deal for Alexandria — it's the city's second-largest employer, according to WBJ. When it moved to the Eisenhower East section of Alexandria from Crystal City in 2005, it consolidated 33 leases into one lease and brought more than 7,000 employees to its campus, according to government documents from the time.

LCOR is also reportedly the city's largest property taxpayer. The mixed-use developer, which maintains offices in New York, Bethesda and the Philadelphia suburbs, has worked with the federal government on several major developments around the Northeast, including the 358K SF Nuclear Regulatory Commission Building in North Bethesda. LCOR has focused on multifamily developments of late, and began lease-up of a 457-unit apartment building near Union Market in October.