The Department of Government Efficiency (DOGE), headed by Elon Musk, terminated numerous long-term commercial leases, starting from earlier this year. Although the move aimed to cut costs and boost efficiency, it is already shaking up an industry once considered stable: commercial real estate.
Assistant Professor Cameron LaPoint, along with Professor Soon Hyeok Choi, conducted research to examine how these cancellations could affect commercial real estate.
Highlights
- DOGE has canceled multiple long-term leases across the country.
- Commercial landlords, often reliant on government tenants for stable income, are now facing vacancies.
- According to Yale Insights, the sudden exits are straining a market still recovering from pandemic-era disruptions.
Department of Government Efficiency (DOGE) Lease Cancellations
Elon Musk’s Department of Government Efficiency (DOGE) recently carried out the largest federal lease cancellations in history, impacting offices from the Department of Education to the Internal Revenue Service.
The move has added uncertainty to a commercial real estate market that was already weakened by remote work trends after the pandemic. Cameron LaPoint, a professor at Yale SOM, said that government leases, which had average terms of 14 years and were once thought to be among the safest in the industry, are now seen as susceptible to political shifts.
Barclays estimated that approximately $12 billion in commercial mortgage-backed securities (CMBS) were linked to government-leased properties at the time of the cancellations. LaPoint and Professor Soon Hyeok Choi of the Rochester Institute of Technology launched a study to examine the fallout.
Their research shows that sudden federal lease terminations pose previously unrecognized risks to the bond market. These terminations could have consequences for investors, landlords, and businesses in the area.
Impact on Commercial Real Estate: By Yale Insights
Cameron LaPoint from Yale SOM and Soon Hyeok Choi from RIT reviewed federal lease data from the DOGE website. At its peak at the beginning of 2025, the website listed 793 leases for cancellations, covering approximately nine million square feet of office space. That number had dropped to 384 by August.
The researchers used additional data from Trepp and the General Services Administration (GSA) to show that GSA leases are very popular in the commercial mortgage-backed securities (CMBS) market and have unique early termination options that are rarely used until DOGE takes action. Their research focused on CMBS bonds with lower ratings and the Washington, D.C., area.
They found that landlords lost 5% of their net operating income between February and June, and that junk-bond CMBS tied to DOGE properties lost 4% more than comparable securities. According to the findings, investors are now pricing in the possibility of an abrupt termination of government leases, which were once thought to be among the safest.
The researchers also identified spillover effects, with nearby properties seeing reduced income and bond prices. A more comprehensive five-year simulation predicted losses of up to $575 million in the market just for Washington, D.C., including $50 million in reduced tax revenues.
LaPoint noted that these losses far exceed the government’s expected savings from the cancellations. This raises questions about the impact on regional banks, which are already struggling with declining office values.
While the lease cancellations could help DOGE meet its cost-saving goals, they also raise concerns about the stability of commercial real estate. The potential loss of these traditionally low-risk government leases could reshape landlord strategies and investor expectations in the coming years.
