US agencies underuse offices, Trump plans to sell—property values could collapse

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Not a single major US government agency is occupying even 50% of their office space. This startling revelation comes at a time when the Trump Administration is reportedly considering selling two-thirds of US government office buildings, according to the Wall Street Journal. This move could flood the already weak commercial real estate sector with more supply, potentially driving down property values even further.

The government owns more than 7,500 vacant buildings across the country, and more than 2,200 that are partially empty. This underutilization of office space has been a longstanding issue, exacerbated by the shift to remote work during the pandemic. The General Services Administration (GSA) oversees 370 million square feet of office space nationwide, much of which is either empty or underused.

Office building prices have already fallen by over 30% from their highs. A mass liquidation of US government office buildings would likely lead to even steeper declines in property values. Developer Don Peebles estimates that buildings will sell for 30 cents on the dollar, leading to a dramatic reset on property values.

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The Trump Administration’s plan to sell off these properties comes as part of a broader effort to reduce government spending and optimize the use of federal real estate. The GSA has been working to right-size the federal portfolio and is committed to optimizing space in federal buildings. However, the timing of this move is unusual, as it coincides with a mandate for most federal employees to return to their offices.

This potential sell-off could have significant implications for the commercial real estate market, particularly in Washington, D.C., where the GSA leases approximately 70 million square feet of office space from private landlords. The cancellation of these leases could further depress property values in the nation’s capital.

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While the prospect of selling off underutilized government buildings may seem like a positive step towards reducing waste and inefficiency, it also raises concerns about the impact on the commercial real estate market. The influx of government-owned properties could lead to a glut of office space, driving down prices and potentially causing financial strain for property owners and developers.

On the bright side, this could present an opportunity for developers to convert these office buildings into residential spaces, helping to address the shortage of affordable housing in many urban areas. As Peebles noted, much of what the government can sell will likely be at fire-sale prices, which could make it more feasible for developers to repurpose these properties.

Sources:

https://www.wsj.com/real-estate/commercial/the-u-s-government-has-a-landlord-and-trump-isnt-a-fan-872c469e?st=74LC2X&reflink=article_copyURL_share

https://therealdeal.com/national/2025/01/21/federal-government-could-sell-two-thirds-of-office-portfolio/

https://www.commercialedge.com/blog/national-office-report/

https://reason.com/2023/10/27/federal-agencies-maintain-offices-that-sit-mostly-empty/

https://www.gsa.gov/tools-overview/buildings-and-real-estate-tools/inventory-of-gsa-owned-and-leased-properties


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