D.C. Has Lost 850K SF Of Federal Leases This Year

The District’s office market is feeling the pain of federal downsizing.

The city lost 850K SF of federal government office occupancy through the first six months of this year, according to CBRE’s newly released second-quarter report.

The report is one of the first to show how much the Trump administration’s efforts to shrink the federal footprint is impacting office leasing demand in the D.C. area, where it has over 90M SF of owned and leased space.

This effort was illustrated by D.C.'s largest deal of the second quarter: the Department of Justice's 15-year lease renewal at Two Constitution Square, where it took 403K SF. The move, first reported by Bisnow, resulted in the agency giving back 172K SF in the NoMa building, a 30% reduction. 

The FBI is set to give back 200K SF at Douglas Development’s Woodies Building near Metro Center. The lease cancellation was posted on the Department of Government Efficiency’s “Wall of Receipts” at the beginning of June. 

In March, the Trump administration announced the U.S. Agency for Global Media would not be moving into a full-building space it had planned to occupy on Pennsylvania Avenue.

USAGM was poised to occupy 290K SF at Eastbanc’s 1875 Pennsylvania Ave. NW, an agreement it had reached under the Biden administration. But in mid-March, administration official Kari Lake called the space “a colossal waste of money” on social media and issued a press release saying she planned to “drastically downsize” the agency. 

The federal downsizing drove D.C.'s overall office market to record 396K SF of negative absorption in the second quarter, according to CBRE, after posting 165K SF of occupancy loss in the first quarter. 

Office vacancy within D.C.'s overall 123M SF of office stock stood at 22.6%, holding steady from last quarter, according to CBRE. The city's 13.7M SF of trophy office space, which typically doesn't have government exposure, posted a much lower vacancy rate of 11.5%.