As the federal government shutdown stretches into its second month, commercial real estate executives are feeling the strain of mounting uncertainty—and warning that frozen funding, stalled deals and staffing shortages could ripple across the sector if the standoff continues much longer.
“Uncertainty has been top-of-mind all year long,” Tyler Blue, senior vice president with the advisory services group at Green Street, told GlobeSt.com.
The shutdown is already the second-longest in U.S. history and may soon surpass the 34-day record-setting one during President Donald Trump’s first term. While thousands of federal workers remain unpaid, the effects in real estate are multiplying. Developers and investors rely on federal agencies to process permits, approve loans and execute contracts—all functions that have ground to a halt.
Delays are becoming costly, says Ross Moskowitz, a real estate partner with Hogan Lovells.
He highlighted: “Uncertainty can delay projects or even halt some transactions. If government funding is on hold, what does that do to the rest of your capital stack? Are the other lenders willing to wait this out?”
The ripple effects are visible from loan desks to leasing offices. “We’re seeing operational bottlenecks,” David Edelblute, a government affairs attorney at Howard & Howard, tells GlobeSt.com.
“Almost every government agency I’ve dealt with is on a skeleton crew or completely furloughed. SBA loans are being frozen because they can’t be processed. It’s likely that you’re stuck or on a several-week or month delay.”
The consequences are particularly harsh for property owners leasing to federal tenants. “If your commercial real estate business relies on federal tenants, good luck,” Edelblute says. “There’s nobody to review and sign it.”
Todd Drowlette, managing director of Titan Commercial Realty Group and star of A&E’s The Real Estate Commission, says the ripple effects extend to housing markets. “FHA has stopped approving housing loan applications, which is bad for the multifamily sector when the need for affordable housing is all over the headlines,” he says.
“Every HUD contract is at risk of going into the red if existing funds run out before the government reopens. That could throw countless commercial landlords into loan defaults for reasons beyond their control simply because the government is not paying rent.”
With HUD rental assistance unavailable, landlords with affected tenants face a familiar dilemma. “They can’t evict, they can’t raise rents,” Edelblute adds. “They just went through this like in Covid. What recourse do they have?”
Developers are also bracing for deeper setbacks. Delays in permitting from agencies such as the U.S. Army Corps of Engineers and the Environmental Protection Agency could drive up costs, Drowlette warns. “It depends on how long the delays last and who is on the hook for any increased cost in construction while the delays drag on.”
Meanwhile, Edelblute notes, programs cut during the Trump administration’s first term that were initially funded as one-time allocations will now require new approval. “Those will have to be passed again,” he says. “Good luck passing $40 billion in green energy projects. That probably isn’t going to happen.”
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