General Services Administration (GSA) lease cancellations have become a new trend since the establishment of the Department of Government Efficiency (DOGE) in January under the Trump Administration.
The government’s overall leased footprint has been shrinking consistently over the last decade, with a year-over-year decrease of over 3% nationally for the past 10 years.
But that's now increased under DOGE, with its Wall of Receipts showing the rate this year is already closer to 4% nationally, and most of the key cancellations have likely occurred, according to Avison Young’s Federal Property Pulse report.
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California is standing out, with 42 lease cancellations this year covering nearly 340,000 square feet, averaging slightly more than 8,000 square feet each.
Only Washington, D.C., at 1.45 million square feet, has had more. To date, we haven’t seen a significant amount of interest in California. There has been little activity or interest in buying the state's space, Grant Hayes, manager of market intelligence and client advisory at Avison Young, told GlobeSt.com.
“Many Government assets are older, [think] Class B and C buildings,” Hayes said. “Suppose the asset has smaller floorplates, a strategic location, and other key characteristics. In that case, there’s a chance it could be repurposed for a better use by the community, such as multifamily residential.”
With that large amount of space hitting the market, Hayes said, depending on the investor’s goals, some are converting the space, while others are buying at a steep discount and plan to offer discounted rental rates to the office market, which would have an impact on rents.
Meanwhile, an additional two million square feet of GSA leases are currently eligible for cancellation in Los Angeles over the next 18 months, compared to 800,000 square feet in the Bay Area and nearly 500,000 square feet in other markets.
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