Part Two: Federal Office Footprint in Flux: Washington D.C. Office Market Trends and 2024 Election’s Potential Impact

SKIP AHEAD TO

• Among Major Government Deals Signed Since 2020, Have Most Tenants Maintained, Contracted, or Expanded Their Footprints—and What Are the Notable Transactions?
• 2024 Sees a 2.6% Drop in D.C. Government Lease Term Length Since 2019, Improving from Last Year’s 7.9% Decline
• How could a Harris-Walz or Trump-Vance White House shape Federal office space and workforce policies?
• Final thoughts

Over One-Quarter of D.C. Office Space Square Footage Set to Expire by 2026, with Government Leases Making Up 42% of At-Risk Footprint—A Prime Market Concern

Washington, D.C.’s office market relies heavily on government tenants, making upcoming lease expirations a critical concern. Expirations peak in 2025, particularly among government leases. By the end of 2026, over 26.2% of total office square footage will expire, with government leases accounting for 42.0% of this turnover—well above their current 31.1% share of occupancy.

Did you miss part one? Check out the current federal office landscape and utilization trends.

Within the government leased square footage expiring through 2026, Class A office buildings are particularly at risk accounting for nearly ¾ of leased square footage expiring in that period. Significantly, these Class A buildings holding these upcoming expirations skew older: the average built year for these Class A expirations is 1990. In addition, more than one-third (37.4%)  of the government leases expiring in the period until the end of 2026 are concentrated in three DC submarkets: DC Noma, DC Southwest, and DC East End.  Some of the more major expirations include leases from the National Oceanic and Atmospheric Administration (NOAA) with 1 million square feet at Silver Spring Metro Center in Silver Spring, Maryland, and more than 600,000 square feet occupied by the United States Department of the Treasury at the Constitution Center in Southwest DC. 

Among Major Government Deals Signed Since 2020, Have Most Tenants Maintained, Contracted, or Expanded Their Footprints—and What Are the Notable Transactions?

Of the leases of 100,000 square feet or larger signed by federal government tenants in Washington, D.C. from 2020 to date tracked by CompStak, the majority of square footage signed represented a continuation of the same footprint (49.0%), while another 35.0% contracted in place or consolidated from several locations ultimately taking less net space. However, only 16.0% of the total square footage represented expansions in footprint. For instance, the Transportation Security Administration’s move to a new headquarters at 6595 Springfield Center Drive from their prior office in Pentagon City reflected a net gain in square footage of 76,812 square feet according to CompStak’s data. In contrast, some of the larger contractions included the United States Patent and Trademark Office renewing 2,529,725 square feet at 500-600 Dulany Street but in the process vacating and moving employees from 190,486 square feet they occupied at 2800 Randolph Street. In addition, the Commodity Futures Trading Commission signed a lease in April 2024 at Patriots Plaza for 147,050 square feet to consolidate and relocate from 288,000 square feet at 3 Lafayette Center. Among all the 100,000 square feet leases and larger that represented contractions in footprint, the average rate of contraction was 21.9%. Finally, in another notable sign of the government pulling back on space or reassessing plans, the Securities and Exchange Commission signed a lease in the third quarter of 2021 to move to 1.2 million square feet in a new headquarters at 60 New York Avenue in Washington, D.C.’s NOMA neighborhood. The building was to be constructed by Douglas Development and Midtown Equities; however, the deal was canceled in October 2024 by the General Services Administration.

2024 Sees a 2.6% Drop in D.C. Government Lease Term Length Since 2019, Improving from Last Year’s 7.9% Decline

While it has not declined dramatically, the average lease term for completed government leases has consistently remained below 2018-2019 levels, averaging 122 months in 2024 year to date. Overall leasing activity also remains down from pre-COVID levels, with the government’s share dropping from a 36.9% average in 2018-2020 to 31.6% in 2024 so far. Notably, one of the longest leases signed this year is a 377,000-square-foot, 132-month renewal by the Federal Housing Finance Administration (FHFA) at 400 7th Street. While shorter lease terms could indicate an increasing desire for future flexibility to shift or vacate offices, the decline in total activity by the government overall has reflected a more dramatic shift over the pre-COVID period, with annual average total activity over the last three years (2021-2023) down 56.6% from the average for the three years preceding COVID (2017-2019).

How could a Harris-Walz or Trump-Vance White House shape Federal office space and workforce policies?

i. Return to Office: The extent to which federal agencies continue their return to in-person work will significantly impact the course and health of the District of Columbia office space market. Here, major differences exist between the two tickets. Both Harris and Walz advocate for flexible work options, aligning with the Biden administration’s broad embrace of remote work. The current administration has emphasized telework as a tool to recruit and retain talent at Federal Agencies, especially as employees increasingly expect flexibility in their jobs. In fact, under Biden, many agencies have continued to rely on hybrid work arrangements, with some sectors finding these arrangements more productive and cost-effective. Harris and Walz would likely maintain this trend, encouraging federal agencies to make remote work a permanent fixture. Conversely, a Trump-Vance administration would likely take a stricter approach, focusing on bringing federal employees back to the office full-time. During his previous term, Trump was critical of telework, particularly in the context of federal employees, arguing that it reduced accountability and oversight. Vance has echoed similar views, and this administration would likely pursue policies to reduce telework and restore more traditional office-based work.

ii. Centralization of Federal Offices in D.C.: Both campaigns have considered, to some extent, the idea of decentralizing federal functions outside of D.C. The U.S. government has already applied this strategy to certain agencies, such as the Centers for Disease Control and Prevention (CDC) in Atlanta and the United States Department of Agriculture (USDA) office in Kansas City. This approach seems particularly likely to accelerate under Trump, who has expressed disdain for D.C.-based employees and agencies, making this a major platform in his campaign. If such changes were implemented, they could represent a downside risk, potentially stunting growth in the D.C. office space market.

iii. Orientation Toward Major Agency Headquarters Projects: The federal government, as a major purchaser of real estate, can significantly influence office space markets with single decisions about where to base headquarters. A prime example is the years-long debate over the new FBI (Federal Bureau of Investigations) headquarters, where options for a continued downtown D.C. presence, relocation to Maryland, and relocation to Virginia were considered. The process proved contentious, involving multiple congressional delegations, governors, and even Trump himself, who specifically opposed moving the FBI headquarters out of downtown D.C. These headquarters employ tens of thousands of workers, including core federal employees and supplementary private-sector contractors. New conflicts loom over projects such as the relocation of the U.S. Space Command headquarters from Colorado to Alabama proposed by the Trump administration. Biden overturned this decision arguing that it would jeopardize military readiness, especially as the U.S. competes with China in the space race. All in all, upcoming decisions made by Trump, Harris, and their respective allies will shape these future projects.

iv. Overall Federal Workforce Footprint: While the Harris-Walz campaign has largely adopted a policy of maintaining the current size of the federal workforce, Donald Trump has periodically raised the prospect of drastic cuts to the federal bureaucracy. These statements are in line with policies enacted during his presidency, including federal hiring freezes and greater flexibility to terminate government employees. While these policies alone may not drastically reshape the office market, if expanded into major workforce reductions — which could be possible if Republicans control both houses of Congress — they could lead to a downturn in federal office space demand.

Final thoughts

The 2024 election could sharply impact federal office policies and Washington, D.C.’s real estate market, depending on which administration takes office. Harris and Walz currently align with the administration’s support for hybrid and remote work to enhance recruitment, retention, and operational flexibility, maintaining stable federal workforce levels and a strong headquarters presence in D.C. Conversely, Trump and Vance may prioritize centralizing employees in traditional office settings, reducing the federal workforce, and decentralizing major federal offices outside D.C. While CompStak’s Washington D.C. government leasing data indicates recent reductions in space, shorter lease terms, and lower overall activity, a new administration could further influence office demand, potentially stabilizing or downsizing the market to align with its broader vision for federal operations. The results of the November 5, 2024 election may be pivotal for the D.C. office market, shaping demand and impacting stakeholders region-wide.

Did you miss part one? Check out the current federal office landscape and utilization trends.