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As the 2025 government shutdown kicks off with no end in sight, the damage from Elon Musk’s DOGE project is already hitting property markets across the country.
DOGE was Elon’s brainchild during his short stint in federal office, and it’s still tearing through the real estate industry even after he walked away from Washington.
As Cryptopolitan reported, the program has cancelled 384 government leases so far, and the DOGE website claims these cancellations saved around $140 million, but that so-called “savings” is crashing headfirst into a financial mess.
The federal government used to be the safest possible tenant. Cameron LaPoint, who teaches finance at Yale, said government leases always came with a polite little cancellation clause, but no one actually used it. Landlords saw it as symbolic, not a real threat.
DOGE changed that. “If you and I are renting an apartment and cancel the lease, there is a penalty of several months’ rent,” Cameron said. “But when the government cancels a lease, the landlords are left high and dry.” Now it’s happening all over, with cities, towns, blue states, red counties, you name it. DOGE’s calculations assume every lease would’ve been renewed, which isn’t always true. Some of those offices were probably going to close anyway due to agency downsizing or moves. But the volume of closures, and how fast they’ve happened, has made things worse. The government has pulled out of properties big and small, from an 845,000-square-foot building in D.C. to a 250-square-foot Secret Service office in New York City.
Landlords lose tenants, lenders lose confidence
Commercial loans across the country are now at risk. Cameron said the ripple effect touches “thousands of loans” because the commercial lending system depends on big tenants like the federal government. Banks package those loans and sell them as securities. When the anchor tenant disappears, the whole deal can fall apart. With the government out, those loans lose value and raise risk nationwide. A GSA spokeswoman says DOGE has saved $113 million for taxpayers, but no one at GSA is talking about what happens to buildings that now stand empty and worthless to lenders.
In Florida, real estate broker Alexi Morgado, who runs Lexawise, says he’s already seeing a chain reaction. “The availability of supply does not always lead to immediate demand,” Alexi said. Buildings with canceled leases are sitting empty, losing money, and becoming harder to refinance. In some cases, owners are thinking about converting them into apartments or mixed-use space. But it takes planning and resources, and not every landlord has either.
In California, Mark Besharaty, senior VP at Arbor Financial Group, says landlords are going to have to chop up their big government offices into smaller spaces just to stay afloat. “To mitigate what I see happening in most cases, the owners of these properties will have to reconfigure the properties to fit a different kind of tenant base,” Mark said. When banks can’t bundle the loans and offload the risk, they hike up interest rates, which hurts more deals across the country. “This is a national-scale issue,” he said. “It’s not just D.C., it’s throughout the country.”
Rural towns brace for more federal walkouts
Smaller towns are getting hit even harder. Unlike big cities, rural areas don’t get included in most bundled securities. When their leases get canceled, there’s no safety net. Cameron pointed out that 57% of leases eligible for early termination are outside the ten most populated states, and 63% are outside the biggest 100 counties. DOGE has already sent termination letters to 61% of those rural offices.
In Marquette, Michigan, Mayor Michelle Hanley said the IRS office closure won’t matter much because no one’s actually worked there since the pandemic. But she’s pissed about DOGE targeting the Bureau of Indian Affairs office in Baraga and the tribal health center in Sault Ste. Marie. Indigenous communities in northern Michigan make up five times more of the population than the state’s lower peninsula. “The cuts would hit hard,” Michelle said.
Tom Whalen, who chairs the business department at Massachusetts College of Liberal Arts, says the federal pullback echoes Keynesian theory. Government spending stimulates economies. But when Washington starts pulling money out, things slow down. “With lower rental income and the loss of jobs, there is lower economic stimulus,” Tom said. “This has a ripple effect across the local economy.”
Meanwhile, President Trump’s administration is threatening job cuts across agencies. Russell Vought, head of the Office of Management and Budget, told House Republicans that layoffs could start within 48 hours. Karoline Leavitt, Trump’s press secretary, confirmed during a briefing that federal workers will be fired “very soon.” Betting platforms think this shutdown will last at least two weeks.
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