D.C. Real Estate Anxiously Awaits Impact Of Trump Workforce Shifts

The nation’s capital is holding its collective breath to see how the new administration’s massive and swift overhaul of the federal workforce plays out.

The D.C. region is home to more than 300,000 federal employees, making it the most susceptible part of the country to these shifts. 

Thirty percent of employees in D.C. proper are federal government workers, and the federal government has 17.3M SF of leased offices and 36.7M SF of owned offices in the District, according to JLL.

In its first few weeks, the Trump administration has launched a slew of changes that could impact the size and location of the federal workforce. Some of these moves could positively impact D.C.'s economy while others could hurt it, and commercial real estate professionals are unsure of how that mix will shake out. 

“Everyone is waiting to see what the net-net will be between return to work mandates versus employee layoffs or government downsizing — voluntary or mandatory,” Stream Realty Executive Managing Director Kyle Luby told Bisnow.

On his first day in office, President Donald Trump ordered all employees back to the office with an executive order that would alter yearslong remote and telework policies. 

At the same time, the administration is trying to cut the federal workforce. Last week, the Office of Personnel Management came out with an offer for 2.3 million civil servants to resign and receive pay through September. If not enough people resign, the administration reportedly is prepared to begin layoffs. 

More than 40,000 employees have taken the offer, The Washington Post reported Wednesday evening. The offer had a deadline of midnight Thursday, but Thursday afternoon a federal judge temporarily blocked its implementation until Monday. 

“I think the market is curious to see the level of response to the administration's offer for the deferred resignation program and what numbers are actually reported,” Lincoln Property Co. Government Services Group Vice President William Ruppe said.

For the employees who don't resign, agencies are determining their own dates to bring them back to the office full-time. They are required to submit their accountability plans with the Office of Management and Budget and OPM by Friday. 

“That’s gonna be great,” Stonebridge principal Doug Firstenberg said when asked about the impact of the federal workforce coming back in person. “D.C., in particular, was hard hit on the remote work, and so it exacerbated the impact on downtown because of retail activity and other things that thrive on occupied offices. So I think that, without question, will be a positive for D.C.” 

Leaders of D.C.'s Business Improvement Districts with heavy federal footprints told Bisnow that bringing employees back full-time would have significant domino effects on their areas. 

“Any major changes to workforce size or in-office policies will profoundly impact downtown, the District, and the broader region,” DowntownDC BID President Gerren Price said in an emailed statement.

NoMa BID President Maura Brophy said her submarket “has felt the impact of remote work” and a larger in-office presence would “bolster” its activity, which she said is already strong due to residential development. 

Golden Triangle Executive Director Leona Agouridis, whose submarket spans the west side of D.C.’s central business district, said that although it’s “too early to know the impact” of the federal government returning to in-person work, having “more people downtown is good for our small businesses and retail outlets, from barbershops to stationery stores, and especially for our restaurants and lunch places.” 

The impact on D.C. is dependent on how deep the Trump administration’s cuts to the workforce go.

The administration said it was targeting a 5% to 10% reduction with the deferred resignation program. It is also targeting some agencies specifically — it placed nearly all USAID workers on administrative leave and is reportedly planning to abolish the Department of Education and cut the General Service Administration’s staff in half.

Many of the Trump administration’s decisions on federal funding could have domino effects in the private sector.  

The decision to pull all foreign aid and effectively defund USAID is impacting thousands of government contractors worldwide, and Luby said downtown D.C. has hundreds of thousands of square feet of office space occupied by contractors that rely on USAID funding. 

Mayor Muriel Bowser said Thursday that while she is “encouraged” by the federal government's return-to-office push, she thinks the personnel and spending cuts deserve more scrutiny. 

“If there is an illogical approach to trimming Federal workforce or agencies, I think that has to be reviewed by the Congress of the United States, and I think we all have to hold the administration to account to make sure any moves for congressionally approved agencies, [full-time equivalent employees] and budgets are handled lawfully,” she said at a press conference. 

As of last May, about 54% of federal employees were in person full time and 10% were fully remote, the Office of Management and Budget found after surveying 24 agencies. The telework-eligible employees were spending about 61% of their time in person.

Only a handful of agency plans for bringing their workers back have been reported on or released publicly. OPM’s memo on Jan. 22 suggested agencies target a 30-day period to reach full compliance.

The Department of Veterans Affairs issued its return-to-office plan on Monday. The agency is requiring all non-unionized employees who have been on remote and telework arrangements and live within 50 miles to begin reporting in person full-time by April 28.

The State Department is reportedly requiring employees who have had telework arrangements to be in person full time starting March 1, and those with remote work policies on July 1. There are exemptions for military spouses and employees with disabilities. 

The Department of Homeland Security ordered employees back in-person full time immediately following Trump’s executive order, ABC News reported, citing an internal memo. 

The Department of Agriculture was reportedly planning to bring back senior staff to the office starting Monday, managers and supervisors by Feb. 10, and telework employees by Feb. 18.

One of the many questions remaining is how the in-person mandate affects the 29% of federal employees who are protected under union collective bargaining agreements. 

On Monday, OPM told agencies to disregard union contracts that would prohibit them from implementing the return-to-office executive order, saying: “any CBA provisions that purport to restrict the agency’s right to determine overall levels of telework are likely unlawful and unenforceable.”

The nation’s largest federal employee union, the American Federation of Government Employees, immediately pushed back after Monday’s memo. 

“Union contracts are enforceable by law, and the president does not have the authority to make unilateral changes to those agreements,” AFGE National President Everett Kelley said in a statement. “AFGE members will not be intimidated. If our contracts are violated, we will aggressively defend them.”

As D.C. commercial real estate owners wait to see how Trump’s mandate will impact daily activity, data shows the city has experienced a slight bump already this year. 

Metro reported that rail ridership entries on Tuesday, Wednesday and Thursday of last week were above the corresponding days in 2024 by an average of 49,000 entries. 

Kastle Systems measured a postpandemic high for D.C. occupancy last week, hitting 51.5% of 2019 levels with a high of 61.7% on Tuesday. 

While the future of the federal workforce plays out, the administration is also focused on cutting its owned and leased footprint. 

The GSA's new Public Buildings Service Commissioner, Michael Peters, said at a public meeting last week that reductions to the portfolio could be up to 50%. Elon Musk’s Department of Government Efficiency has already terminated at least 22 leases, it announced on X Sunday night, saving the government $44.6M, and it is reportedly in the process of offloading 7,500 leases nationwide.

“How the moving out of those buildings, the downsizing of the workforce, agency changes, return to work, how all that math turns into net demand, I think it’s still to be determined,” Firstenberg said. “Am I concerned about it? Absolutely. Are we keeping an eye on it? Absolutely.”