For CRE, the motto in 2024 was “Survive till 2025” via extend-and-pretend. Now it’s 2025, and here comes the government’s office space.
By Wolf Richter for WOLF STREET.
The DOGE people in the Trump administration are considering shedding a big portion of the massive office space that the government owns or leases nationwide, managed by the General Services Administration (GSA), including selling two-thirds of the office space the government owns and terminating three-quarters of the leased office space, according to the WSJ.
Much of this office space is vacant or underused and poorly maintained due to lack of funding, according to GSA testimony before Congress in 2023, cited by the WSJ, which further noted:
“A recent report from Sen. Joni Ernst, a Republican from Iowa who chairs the Senate DOGE caucus, found that not one of the headquarters for any major agency or department in Washington is more than half full. GSA-owned buildings in Washington, D.C., average about a 12% occupancy rate. The government owns more than 7,500 vacant buildings across the country, and more than 2,200 that are partially empty.”
The office sector is already in a depression, with default rates that exceed those during the worst moments of the Financial Crisis. Putting this inventory on the market for sale is going to weigh on the already collapsed prices of older office buildings – prices of 50-70% below the last sale before the pandemic are now common.
And terminating leases is going to stress office buildings, their landlords, and their lenders even more, likely entailing more defaults and foreclosure sales. This is a much needed but very bitter medicine to alleviate government waste.
What office landlords and their lenders are facing.
Here we look at the leased office space, where those buildings are, and what portion of the leased space the GSA has the right to terminate in 2025, and also through 2028 (Trump 2.0), based on an analysis from Trepp, which tracks commercial real estate debt and CMBS.
- GSA leases 149 million square feet (msf) of office space around the US.
- GSA pays $5.2 billion in annual rent to private-sector landlords.
- Through 2028, GSA has the right to terminate 53.1 msf of leases, or 35.5% of its leased space, spread over 2,532 properties.
- In 2025, GSA has termination rights on 21.2 msf spread over more than 1,000 properties,
- If GSA terminates all possible leases during Trump 2.0, it would save the government $1.87 billion in annual rent after 2028.
- In the vast Washington DC metro, GSA leases nearly 10% of the entire office market, 35.8 msf in 446 buildings, and can terminate 9.6 msf of that in 2025.
- In the Washington D.C. metro, GSA currently pays $1.47 billion in annual rent.
- GSA leases nearly 6% of the office space in the Kansas City metro (DoD, USPS, Treasury, VA, and USDA), 4.3 msf, of which it can terminate 1.0 msf in 2025.
Here are the top 10 metros in terms of government office space. GSA leases 66.3 msf of office space in them and has termination rights in 2025 on 18.9 msf (28.5%):
| Metropolitan area | Number of buildings | Office space msf |
% of total market | Annual Rent, Million $ | Space with termination rights in 2025, msf |
| Washington DC | 446 | 35.8 | 9.7% | $1,470 | 9.59 |
| New York City | 223 | 5.0 | 0.7% | $249 | 1.53 |
| Hagerstown-Martinsburg | 60 | 4.8 | N/A | $210 | 1.58 |
| Kansas City | 78 | 4.3 | 5.8% | $99 | 1.03 |
| Philadelphia | 124 | 3.0 | 2.9% | $97 | 0.71 |
| Atlanta | 90 | 3.0 | 1.9% | $68 | 1.35 |
| Los Angeles | 168 | 3.0 | 1.0% | $134 | 1.04 |
| Dallas-Fort Worth | 86 | 2.8 | 1.4% | $82 | 0.57 |
| Chicago | 113 | 2.4 | 1.0% | $92 | 0.93 |
| Denver | 74 | 2.3 | 2.3% | $77 | 0.58 |
| Total | 1,462 | 66.3 | $2,576 | 18.9 |
Office CRE would be stressed enough without this.
The office sector of commercial real estate is in a depression, and office debt just keeps getting worse: The delinquency rate of office mortgages across the US that have been securitized into commercial mortgage-backed securities (CMBS) spiked to a record 11% at the end of 2024, blowing by the Financial Crisis peak, having exploded over the past 24 months from an everything-is-just-fine 1.6% at the end of 2022, to a disastrous 11.0% at the end of 2024.
The motto in 2024 was “survive till 2025” via extend-and-pretend. But now it’s 2025, and here comes the government’s vacant office space.
Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the mug to find out how:
“Much of this office space is vacant or underused and poorly maintained due to lack of funding”
$2T deficits and yet it’s not enough $ to adequately fund maintenance.
The PE sharks are going to have some exciting months/years as this stuff comes to market.
It’s not just GSA space. There are many additional “federal contractors” which likely have excess space as well.
And if the new administration also takes a serious look at reforming Medicare, where it’s clear that “perverse incentives” are needlessly driving up overhead costs… then trimming out those private, but government funded “administrative” offices will put yet another large chunk of real estate on the market.
“There are many additional “federal contractors”
Absolutely true.
There are about 2 million *federal* *employees* (and another 18 million state and local government *employees*…out of 160 million US adults on employer payrolls total).
But there are about another 8 to 10 million federal *contractors* whose pay all comes from direct government spending.
The employee/contractor shell game has distorted reporting for a long time.
The only virtue is that contractors can be terminated a lot faster.
why scare quotes? 18 million state and local government *employees*…? That 18 million includes teachers, cops, and firefighters,.
Correct. It is almost like the government reports “employment” statistics in a phony way, for political purposes.
The quotes were to distinguish between federal civilian *employees* (about 2 million) and federally paid *contractors* (estimated by academics at between 8 to 10 million – but rarely included in the spending discussions),
Ditto with state and local employees and contractors.
I guess saving $5-6B/year is a start, but it’s going to be a while at that rate to get to $2T
1. Yes, but every little thing counts. Government spending is huge, and spread far and wide. “A billion here, a billion there, and pretty soon you’re talking real money,” as Sen. Dirksen said so eloquently long ago.
So ok, today it might be: “$10 billion here, $10 billion there…”
2. This article was really ABOUT CRE, and what this WILL DO TO CRE, and where. It wasn’t about the government budget.
Indeed. What will do to CRE? Then what that will do to CRE debt? Then what that will do to the institutions holding that debt? And so on.
Well, that is the thing about building/living in a house of cards or castle of sand.
The whole thing can crash down when the endless lies are finally confronted.
But there is no other way for a healthier economy to arise.
This for CAS:
Couldn’t agree more Cas!
Time and enough for this current ”house of cards/sand castle” to be washed away in the tides of time as have all others, for ever, far damn shore!!!
When and IF Trump actually follows through all the way on his campaign promises, WE, in this case WE ALL the PEOPLE, will once again be able to:
1. Save and have at least a decent return on our savings, though with his recent comment apparently ignoring the VAST damage due to inflation that is a serious challenge now for those of us on a very fixed income.
2. Buy a family ”HOME” humble as it may be,,, for less than one of our total salary for the next 30 , or at least 10 years so parents can have at least one at home to be available for their babies.
3. Be able to be out on/in our public spaces without fear, formerly known as paranoia, but now WAY beyond the definition of paranoia as, “Unreasonable fear.”
WE can only hope Trump does not get SO bogged down in ”retribution,” that he forgets WHO elected him,,, ETC.,
Your headline made sense to me not the Federal Budget. I can not even fathom what the market price for office buildings is. I would also expect a great deal of government office space outdated and not class A space and very difficult to sell if they try. Will be interesting to watch. Fortunately the decisions do not require any congressional approval since no funding is needed.
Unless funds are needed for demotion??
The bitter medicine may be too much for our current economy, increasing chances for a recession or worse. Cutting costs in our huge economy is complicated.
“Cutting costs in our huge economy is complicated.”
That is the thinking that leads to federal debts being well in excess of US GDP, without a major war ever being fought.
Every federal government contracts lease has what is known as a termination for convenience clause allowing the government to end the lease for any reason or no reason. The contractor gets paid limited T For C costs, but no future lost profit. It is a mandatory procurement clause read into every lease by operation of law.
RE leases are the exception:
“GSA generally takes the position that real property leases do not need to adhere to the Federal Acquisition Regulation’s requirement that a termination for convenience clause be included in contracts. Most courts, boards, and the GAO have agreed—and for good reason. By statute, GSA leases can last for 20 years. These leases often require the construction or renovation of buildings, which usually entails the use of financing to raise sufficient funds. Even in the sunniest of financial times, no lender would provide financing for the construction of a building that will depend on rental payments when the Government tenant can terminate at any time, for any reason. Thus, in most of its leases, GSA willingly and justifiably deletes the termination for convenience clause seen on GSA’s Standard Form 2 that is available online.”
https://www.pillsburylaw.com/a/web/2053/5815CE359A8649464BB374134678FBBE.pdf
Under the constitution, the current congress cannot not commit funding of future congresses. Operationally, Congress has to approve funding every year or every session. There’s a lot of cute wording in contracts to give landlords comfort, but it’s really just BS.
But aren’t the DOGE guys also planning to force everyone to return to the office? What percentage of that under-utilization is due to covid-era WFH policies that they’re now planning to terminate?
2023 was not a normal year to tally office utilization as nearly everyone was still under covid-era WFH rules.
Lune,
Those offices were nearly vacant or vacant before 2020. A lot of them are rundown and need lots or work (money).
Paragraphs #2 and #3 in the article:
Much of this office space is vacant or underused and poorly maintained due to lack of funding, according to GSA testimony before Congress in 2023, cited by the WSJ, which further noted:
“A recent report from Sen. Joni Ernst, a Republican from Iowa who chairs the Senate DOGE caucus, found that not one of the headquarters for any major agency or department in Washington is more than half full. GSA-owned buildings in Washington, D.C., average about a 12% occupancy rate. The government owns more than 7,500 vacant buildings across the country, and more than 2,200 that are partially empty.”
Got it. I assumed if they testified in 2023, the GSA’s data was from that year or the year before. But if the numbers are from pre-covid, then they’re more valid.
Another possibility is that DOGE is calling workers back to smoke out the quiet quitters and other sluggards who have no intention of actually working. Once they fire them, the true utilization numbers will become more apparent.
Wolf,
Thanks for reminding the commenters of the true point of the article. I have come to the conclusion that reading comprehension skills are on the decline.
The office space tremors being felt in many cities are rooted in the interest rate manipulations of the last 3 decades. The manipulations were orchestrated by the banking industry which was conducted by the Fed. The Fed “thumb on the scales” of CRE valuations was joined by the “fingers” of the GSA (building ownership and leasing).
“I believe the root cause of every financial crisis, the root cause, is flawed government policies.”
—Henry Paulson, Former U.S. Treasury Secretary, quoted in Huffington Post, August 27, 2013
Reassessing the role(s) of government policies surrounding all financial crisis makes sense, IMHO. That said, I share your sentiment on the enormity of addressing the problem…
Sell that baloney to the 1930s crowd.
This time IS different, you mean?
At the time Paulson was worth $300M as the ex-ceo of Goldman Sachs…..which did more than ok when that episode’s dust settled, as I recall.
Gov’t is NOT the only player is this disgusting petty dead end game we play.
Taking sides is also becoming very stupid……other than the planet’s, but homeostasis is generally an unknown concept…..or summarily ignored if not.
Well, having interest rates be absurdly low for 10 (!) years certainly created a lot of distortions in CRE.
I think that it is more important that INFLATION-ADJUSTED interest rates were negative for maybe 4-5 years.
We can now see clearly that capital allocations were strongly distorted, and that a return to normal practices will be somewhat painful.
Similar comments for Globalization and the Phony “Free Trade” policies of the last 30 years. Industrial capital spending is almost as messed up as CRE investment.
Yes, it makes sense, but won’t percent occupancy increase if the government employees who have been WFH come back to the office? Then, adjust that for how many subsequently get laid off.
That was my thought too, but the numbers aren’t very significant. The ambiguous executive order ending “telework” for Federal employees… Something like 10% are fully remote, putting that at 200-250k, and with 7,500 vacant buildings that comes to ~30 returned-to-office feds per vacant building. Executive offices for everyone! So between that, and factoring in partial vacancies, and reviewing Wolf’s data, there’s a TON of room to trim the fat despite the return-to-office order. Hybrid/partially remote folks tend to have offices, so they won’t tip the scale either
Then factor in layoffs as well. The plan to lay off or eliminate federal agencies will weigh in too. Like reducing IRS headcount to save a few bucks while foregoing the massive heaps of additional tax revenue they would bring in that pays for each IRS employee multiple times over. At first it just sounds completely moronic, until you think about who it benefits…
I’m sure the ex or “would be” government employees will become highly productive members of the private sector. Imagine the increase in GDP alone from all of their efforts.
Like moving land from unproductive government ownership (costing the taxpayer $$), into the hands of tax paying private entities who will certainly be generating tax revenue for the government.
The other thing nobody mentions is that the US Government is the largest buyer of almost everything, The program and research cuts already in the works represent hundreds of thousands of jobs that money flows down to – extra spending on defense won’t make up for that.
If you are looking for where the job losses come from that tip us into a recession, look at all the downstream spend of the things Government funds. Call it waste, but also call it mortgages and car loans.
What is the average additional tax revenue per employee at the IRS? I have no idea. Could be that AI can replace the employee for tax revenue generation. I would think AI would be much more productive.
@ini
The Congressional Budget Office, among others, has studied this. Google CBO publication 60037 (not going to post links). Half the country doesn’t trust the government, science, or math in general, so some may not trust these results. Politics could be a factor, I don’t know much about CBO credibility.
Summary: “the agency estimated the budgetary effects over the next 10 years of three illustrative options that would rescind varying amounts of the IRS’s mandatory funding:
A $5 billion rescission would reduce revenues by $5.2 billion over the 2024–2034 period and increase the cumulative deficit for that period by $0.2 billion.
A $20 billion rescission would reduce revenues by $44 billion and increase the cumulative deficit by $24 billion.
A $35 billion rescission would reduce revenues by $89 billion and increase the cumulative deficit by $54 billion.
This as with the tarrif impact as imposed by Canada will have a hugely negative impact on the public and employee consumers who lose their jobs
I don’t buy the mantra that civil servants don’t work or don’t contribute to the economy and yes they also pay taxes
It will however impact real estate practices (housing )
The tarrifs imposed USSide will however bring in revenue in lieu of directly raising federal taxes
There will be chaos and a huge amount of pain as things settle out less pressure on wages though as new workers to replace immigrants become available
The article and comments triggered my curiosity as to whether there are similar issues of states’ governments office space utilization including consideration of remote work.
A 5/2024 OMB report summarized in fedweek.com reported on the work site status of 2.3 M federal employees of the 24 cabinet departments and of larger independent agencies that account for all but two percent of federal employees. 1.2 M must work onsite full time, about 1.1 M are eligible to work offsite and 230,000 about 10% of federal employees work mostly remote fulltime.
In Michigan, office space is managed by the Real Estate Office Services of the Department of Technology, Management and Budget (DTMB). In FY 2022 the state owned or leased 41.5 M sq. ft. of space which was down 53,400 sq. ft. from the previous year. Decreases in leased space were offset by the opening of a 100,000 sq. ft. state police building.
The legislature is interested in the fiscal effects of remote work and now requires an annual State Budget Report regarding this. The March 1, 2023, report stated that 23,700 state employees or 50% of all employees continue to work remotely. This appears to be much greater than remote working federal employees. The report categorizes related expenses as Building Operations, Utilities, Office Supplies and Information Technology and tries to compare 2022 with the onset of remote work in 2019. The report comments that the identification of costs and savings of remote work is “challenging as variations in reported costs could be attributable to multiple other factors.” Comparing 2019 to 2022 shows net $9.8 M costs.
The report has a “Boilerplate” chart comparing various items including office space for various departments. Some increased. The biggest decreases were in the Departments of Civil Rights, Health and Human Services and Licensing and Regulation. The Attorney General’s Office increased. Our equivalent of the DMV is basically unchanged.
Commercial real estate, a specialty of our current president and his kids.
This list of cities pretty much all blue non MAGA Harris supporters.
Elon and the Doge crew looking for cuts.
Looks like a great low hanging fruit opportunity to save a billion here and a billion there
California is similar and of course have to consider the massive amount of county workers in various areas like health care. The governor was fine with 100% remote but most agencies are back twice a week mostly to help save downtown businesses. Almost all offices that fall into 2 or 3 days in office have gone to hotelling and reservation systems rather than dedicated. This is shrinking the footprint but government has a need to grow and people might otherwise retire as working from home a good gig. I am still 100% telework and have been since 2020. They wouldn’t have a place to put if they brought us back in as they did give up lease on super expensive downtown buildings. Politically difficult too as the only positive of my job, sadly, is 100% telework, and if that changed a lot of people might move on and our agency knows it. After 5 years of working in bathrobe and slippers and filling gas tank once a month would be an adjustment.
Keep in mind that a lot of office space owned or rented by the government is a favor for a friend of a congressman or senator. Maybe a large contributor owned an older building for which he couldn’t get a decent rental rate or sales price, or there’s a building in a town that would be derelict if the government didn’t buy it and maintain it to some degree, bringing down property values throughout the area. Not to mention what happens when large land owners are faced with a massive decline in perceived wealth if property prices decline further. These kinds of announcements garner a lot of hope, but it will be interesting to see how much is actually relinquished over the next year or two as Congress weighs in.
Does Congress get to weigh in? I doubt that Congress has much to legislate on the subject of vacant office spending.
Maybe those congressmen’s friends should have taken the hit on their crappy property long ago like other citizens have done? It’s all nice, but…
“These kinds of announcements garner a lot of hope”
Not really. I imagine most of this stuff will be unloaded as sweetheart, fire sale deals to those same insiders. I.e. sell a derelict building with a market value of $10mil, for $100mil to the government, then buy it back at $1mil.
Do you really think some random landlord is going to get a piece of this action? I’m sure Blackstone is already salivating at the idea of picking this stuff up for pennies and then reselling it for massive profits.
Your example makes no sense. A derelict building with no tenants (income) has a market value of zero, not $10 mil. If this building is owned by a private landlord, why would the government buy it at all, if it is trying to unload its unused office space? Your example is upside-down. It would only be a sweetheart deal if the government owned an empty office building, sold it for pennies on the dollar to a private party, who then figured out a way to increase the tenancy to make a good profit. But the CRE market is in the toilet and will stay there for years or longer.
I didn’t expect DOGE to notice something that might actually make sense! Maybe it’s not a complete dog-and-pony show…
Yeah it is. It isn’t just about having butts in a chair, the new directive means replacement computer networks have to be installed in some location as well as the recalled employees must work in an appropriate facility. The ‘supervisor’ needs to see them in order to supervise them….more wasted resources. The employee WFH now takes care of his/her own work station, does the cleaning, eats a quick bite at the kitchen table and does not require a lunchroom or cafeteria. Parking? Phone service?
It’ll end up costing more in the long run if the details are accounted for in a truthful way.
CRE office space for someone doing admin office work is about as necessary as berths for clipper ships are for commerce and trade. Computing has changed everything.
And think of the stupid forced to attend meetings all on ‘company time.’ Next thing you’ll know these recalled employees will be asked to work on a new ‘mission statement’ and/or display the ‘right’ attitude for acceptance and promotion….instead of just getting the job done.
The problem with WFH is that people have to be interested in and dedicated to their work, they have to be self-motivated to do the work, and they have to be disciplined. I run my own show, I work from home, and I love what I’m doing and I’m dedicated to my work. So for me, in my situation, WFH is great and very efficient. And there are many people like this, working very efficiently from home. But for many other people, their work is just a job, and they only care about the money, they’re not self-motivated about the work, couldn’t care less about it, and they’re not disciplined about it. And when not tightly supervised, they will do whatever, and become unproductive, and might discover that they can do two full-time jobs at home, working 20 hours a week in total, and double their income. For them, the discipline of an office environment and a supervisor nearby will do wonders, though they will obviously grouse about it.
Sorta true, but nobody knows the numbers between the ‘good’ wfhers and the ‘bad’ wfhers.
If they goof off at home, they will find a way to goof off in the office too. At least with WFH they are not wandering over to the productive person’s cube to distract them with tales about their cat, their broken garage door and their thoughts on the upcoming sportsball game.
Having dealt with insurance claims adjusters for the last two years has been a full time job for me because of a series of housing catastrophes and being a victim of a hit & run auto accident disaster. I have found most of these adjusters working from home. Their service has been substandard to say the least. They couldn’t care less about your concerns. They care about one thing, the bottom line, denying claims and saving money for the insurance company’s investment portfolio. They live in the comfort of their home with their dogs barking in the background, while you are suffering through living like you were in the 18th Century. The WFH model works for some jobs but NOT others.
Seems like it’s easier to identify the slackers when you can analyze their screen time, than trying to look over their shoulders.
I have a friend 4 wfh jobs .seems to be able to handle it . Just bought a 500 k house in flyover .
Screen time = Productivity?
No bigger waste of time than Monday mornings in the office discussing ‘the big game’ the day before. Good thing I could ad lib a whole baseball game by a 30 sec glance at a box score.
I work two full-time jobs as a software architect:
– A smaller company (500 employees) that went public in 2021. I’ve been working remotely here since before COVID because they didn’t want to lose me when I moved away from their office location.
– One of the largest US banks. I joined in 2021 after realizing how straightforward it was to secure an offer as a software engineer. While some banks are enforcing return-to-office policies, they gave me a personal exemption to continue working remotely.
At both companies, I’ve consistently overperformed, earning top bonuses every year. I’m much happier and more productive when working from home. While I agree remote work isn’t for everyone, I strongly disagree with shaming people for managing two full-time jobs.
Both my wife and I have been working from home for almost ten years. My wife works for the Federal Gov, via third-party firm- and it would not be impossible, but very difficult for them to find a resource with her skills to physically show up in an office. (Oracle Financial Applications Techno-Functional, very senior level) People with advanced skills in this area are easily able to find remote work for incredible money whenever they want a change.
Meanwhile, I am exactly the person you describe above- working more than one simultaneous job- one full time, with benefits, the other contracting. I’m making really good money in both. I work around 60 hours a week, including some weekends and both employers are lucky to have my skills at their disposal- and they have made it very clear they agree, and are pleased with my work. I mitigate cyber-security attacks and build logical security infrastructure to keep the bad guys out of your bank accounts and credit cards.
Going into an office makes no sense for either my wife or I. All caps NO SENSE! My wife covers all mainland time zones East to West. I’m often writing rules to mitigate attacks in the middle of the night. It would take 5 or six people in office settings to replace the work my wife and I do from home. I don’t go for the idea remote workers need to be supervised. It takes very little time to recognize and cull out lazy or stupid remote workers. I’ve seen more useless dead weight people in offices, at the proverbial water coolers, break rooms, and cubicles.
That’s a poor management problem resulting from failing to set deliverables that can be tracked. If someone can get their work done in 4 hours, why should they sit there for 8? All that does is reward the slow workers because they become the pace setters for everyone else.
The point of a job is to get work done, not put a butt in a seat for 8 hours. Bad managers just check to see if the butts are in the seats, good ones look at the work output.
My nephew told me that one of his Cal fraternity brothers was getting two full time paychecks working two ful time jobs from home during Covid. It seemed like a lot of work (like dating two women at the same time) but unlike dating two women that “costs” twice as much the guy working two jobs was “making” twice as much (all he did was buy a second laptop for the second job). Durring Covid I was dealing with multiple city and county workers who were all “working” from home and it was rare that I got a call back or email back in less than 5 business days,
@Sandy – Agree that managers should be looking at results and not judging employees by whether they can main a nonzero amount of productivity for an arbitrary amount of time each day.
There are so many bullshit jobs (and a book with that title). Most jobs I’ve personally worked have been at least 25-50% BS and basically a waste of everyone’s time and money, and these aren’t even office jobs.
If people can, in reality, do eight hours of work in half the time while in their underwear and with the cat doing half the typing, then by all means do it!
Instead of RTO, let’s do a 32 hour workweek to reduce the pool of available labor and see what happens. My bet would be mainly a decrease in fake work and little else.
Sandy,
That’s not how it works. Your mentality is what’s killing the whole WFH thing. Everybody thinks ‘i get my job done is 2 hrs therefore I deserve to be paid for 8’. No. This is dumb. Everyone thinks they are a great worker and can work uber fast, even when they can’t compared to their peers. The point is you are on contract for 40hrs per week at an annual salary, that’s the agreement. If you work way faster than your peers or more or better etc, the company should acknowledge this and promote you, pay you more, etc. But thinking you are entitled to 40 hrs pay at 10 or 20 hrs of work is what created this mess. And companies are catching on and hauling people back to the office to teach them that this isn’t how it works. WFH is a great thing but like Wolf says above, workers need to respect the flexibility and not abuse it. Too many abuse it because of an entitlement mentality and thinking they are more productive than they actually are.
For my company which put a dollar value of each head count as $300k per year on am average if in usa
If these people are allowed to wfh then the management point is.. why can’t we hire 3 people in cheaper countries for the price of 1 people if all the job can be done remotely.
Employees in higher cost geography should be careful asking for wfh as these jobs can be cheaply done in cheaper geography
Bang on on what it takes for WFH.
To Oldguy, while nobody knows the numbers, one can safely say the ‘bad’ wfhers will outnumber ‘good’ wfhers a good bit (my guess would be at least 3:1, if not 4:1). IMO, Discipline like common sense is fairly uncommon as most human beings natural state is laziness.
there sure seems to be A LOT of “irreplaceable” experts (at least in their own mind) populating the employee WFH ranks. I guess the world will be up a creek when they are gone.
No. They simply need to do daily stand up meetings. It’s just a 15 minute daily meeting where they go around the room and everybody has to state what they did yesterday, what they are doing today, and what the plan to do tomorrow. They also state anything that is blocking them from completing their work, so those issues get resolved and there are no excuses.
yes blake, same with what alex posted. if you’re working two full time jobs, you’re not really working either of them full time. the guy who described contracting, that’s fine. that’s no different than driving an uber or delivering food during your free time (since he said he works 60 hours a week).
but actually having two full time jobs is abusing both of them
This is in every professional field, the professional who figures out they can work half as hard for twice as many shifts. Yeah they work almost every day from 10-2pm but they retire at 50.
It’s annoying to be around because we all know them. They suck at their job and everyone pretty much dislikes them. But again, they retire at 50.
Corruption at its finest
It comes down to leadership and managers mature enough to support remote work. Underperformance comes from a lack of expectations and follow through from management. Both of those are less needed for highly experienced and seasoned staff. In most places that staff exceeds their manager’s knowledge of the role.
A common misconception by management is that people can be productive for 8 hours straight every day. Look it up, studies exist, your only good for about a 3 hour sprint.
WFH allows us to stretch that 8 hours in to productive sprints. That was my experience going into the pandemic.
As an IT Infrastructure manager, we shifted twelve thousand people to remote work. IT teams surged in productivity in moving the workforce to WFH and in subsequent months bringing nearly all other IT projects back on schedule. We ended an 18 month sprint with every project completed on time. The office 365 migration came back from the dead and finished 1 month earlier than its initial projection.
Don’t even get me started on the cost savings.
You may not be in IT, but what I described above is miraculous.
Sadly, despite nearly two years of outstanding performance with rock solid numbers. The leadership started wondering what we were doing at home. I suspect they saw how unproductive they had been and wondered about the workers.
They discovered, those teams that averaged 20 years with company were far more valued at other companies.
That refreshed the HR, Finance, and IT departments as all the senior employees left between vaccine and return to office mandates.
I look through this lens when frustrated by near daily tech and service failures. Offices are full of inexperienced staff.
Ye though I walk through the valley of the shadow of noob, I shall not fear, as I once was a noob and learned in time to code and manage the virtual spaces, within virtual spaces.
Give it time, it will get better.
Won’t somebody think of the rentiers? /sarc
As a retired state employee of 40 years. We always had more people than we needed. Way too many layers to get anything done. This went way past all the HR issues which made it nearly impossible to get rid of people that needed to go.
When the medical center I worked at was sold, everyone was fired and had to reapply for their position.
It was rough to justify many as they really didn’t do anything. I was medical and worked directly with patients, so no issue and could have worked most anywhere.
Many were not hired and had no skills in the private world.
I would not expect this to help the labor shortage except at the dollar stores.
Just for the record, I stayed for awhile and then retired. Way too many years without any real supervision.
So true. Having worked at Intel in the 90s and in the state now it is crazy the differences in productivity, management bureaucracy and incompetency, and widespread nepotism. Most of us joke that our jobs are basically UBI. Hard to really name projects that have succeeded and can’t name one that did it on time and on budget. Usually they fail multiple times or they change the definition of success. Sadly no accountability ever happens as the system integrator is just blamed.
government workers consistently have some of the lowest work satisfaction rates in the economy. My guess is for reasons stated: layers that have to get worked through. also most work is compliance. following rules and regs, no room for creativity. So not surprizing that government jobs offer security and bennies above the private sector. This causes resentment from the private sector taxpayers. But without those bennifits you will not attract good talent.
Kurt – your comment illustrates one of the big changes in on-the-ground ‘Murican society in my lifetime. In earlier days, private industry offered good money AND good benefits/retirement to general labor in the wake of the U.S. being, essentially, the last industrial society standing in the wake of WWII. All Gov’t’. usually had to offer those needed to staff its requirements were reasonable benefits and retirement-good enough for many (…and perhaps, given the old and longstanding, cliched complaints, a place to park some of the surplus or substandard labor force somewhat productively). By the ’80’s, much of U.S. business was enthusiastically finding ways to shed their former benefit/retirement policies/obligations to the American workforce-given this, little wonder that Gov’t. employment, with its more-certain benefit packages, became, and is now oft-considered plum employment for those not on a ‘change your job every three years’ path. (…in a poor analogy, think of the numbers of those here who are forsaking stonks for Treasuries…).
may we all find a better day.
Certainly some policies might save some money but by and large many policies will cost money and some could be inflationary. An example is raids in farm country in Monterey and Central Valley, which isn’t a lot of people getting picked up but has scared most workers so only 20% of the regular workers are coming out to harvest current crops. If Mexico and Canada tariffs get implemented could see food inflation inch back up.
I am guessing a lot of these decisions haven’t been fully thought out in terms of implications but I think most logical people don’t think millions of people can be rounded up to start with and certainly what that means to the labor force and inflation. Citrus, strawberries and other items don’t pick themselves like how the wine industry has mostly automated harvesting where you basically need labor for winter pruning.
How did companies do all this stuff (harvest crops,etc) before the influx of people coming across the border to do this for next to nothing?
Farm work has mostly always been migrant labor or labor done by the owners, with most farms being corporate owned today the labor mix has changed.
Building trades are a little different, when the middle class decided that their children should have office jobs and not get their hands dirty, it shifted over the years to the a different labor source. As our own citizens had more upward mobility, we had a labor shortage in get your hands dirty work.
The big news in farming over last 20+ is how mechanised/ automated it has become.
Part of what’s created a strong demand for blue collar labor is what you mention, but also white collar dollars from people in tech, working multiple WFH jobs, PPP loans, free money, record asset prices, etc. Expect this to dry up and start rolling downward and hitting blue collar demand. White collar dollars are propelling a fair amount of this, and if those dry up, so will the demand for all this dirty hands labor.
From what I have read, this labor is going to come from ending social programs like welfare, imposing work requirements on others, and reducing the federal workforce. I don’t think they’ve thought this all the way through.
Given that about 1/3 of those receiving some type of welfare, which would have to be defined(TANF, etc), are disabled or have disabled child. Combine that with agricultural work is seasonal and often requires mobility is a problem.
They have continually decided to force e-verify with negative and punitive consequences for those that break the law. This dates back to Reagan.
Seems logical going after construction would be a more logical start as a good argument those jobs are taking jobs from others. Hard to make that argument with farm work.
There’s a reason these are called Skilled Trades – it takes 4 years to get a plumbing license. 5-7 years for electrician license.
All of the trades are desperate for labor, the older ones are retiring and not enough new entrants into the fields. It’s a major problem.
Agriculture does not employ the vast majority of immigrants. I think it would be worth paying a little more for food to have a secure border.
Paying more to the workers could be offset by properly enforcing antitrust law against the agro-industrial complex. Increased competition would lead to lower costs.
The other driver of lower costs could be MAHA, people changing their diets away from overly processed disease-inducing foods. I’m having an easier time shopping now that I just ignore all the shelves filled with processed carbo-junk foods, too…
Spoken like someone who has never had to worry about where the next dollar for food or rent was going to come from.
I hear you, but there are already programs for food security. The bigger issue is inflation-induced poverty, and I also pointed out that costs could be lowered by making the marketplace more competitive and less monopolistic. That applies to a lot more than just agriculture, and would go a long way towards helping everyone afford food and rent again!
In a non-monopolized economy, corporate profits as a share of GDP would be lower (not so good for the stock market), but labor’s income as a share of GDP would be (and historically was!) significantly higher, making life more affordable for everyone.
Its odd how people justify underpaying immigrants while villainizing others. Is it cool to exploit others to get a cheaper meal? (uncomfortable cough) I guess I’ll tip my waitress more tonight.
As far as economics goes. If your going to muck with it and define a minimum wage, then that “minimum” should apply to all workers.
Yes, that will increase the price of things.
The price of things, is not solely on based on the profits of the producer. Its complicated. Mostly due to the governments mucking with the system.
If the government stops mucking with, it will get messy and the government will feel the need muck with again tomorrow.
Give it time. Things will be more expensive tomorrow,
“I am guessing a lot of these decisions haven’t been fully thought out in terms of implications but I think most logical people don’t think millions of people can be rounded up to start with and certainly what that means to the labor force and inflation.” Crazy to think that Kamala and crew werent screaming on a mountian top about this for their campaign.
We are all going to need to suffer in order for the US Government to get smaller. Some will suffer more than others. We need to help each other in order to get through this. DOGE needs to push: TERM LIMITS for all of Congress.
That what elections are for:)
Government doesn’t need to be smaller as that is never the solution. The solution is having government work on behalf of society. That will be most unlikely.
Who would know if government was or wasn’t working already?
It’s just campaign milarkey to say it’s not working.
Cuz if they said it’s hunky dorey, then who’s voting for that guy?
Government is you. It’s you hiring a guy to cut your check. It’s you hiring a guy to clean up the national park. It’s you hiring a guy to make sure your plane doesn’t hit some other guys plane.
It’s working ok up till now. But sure demand it be broken, it’s your government just like it’s your tv on the wall. Do you want that broken too?
Do this, just Chuck your tv out of a window. Does it still work? see where I’m going with this?…
You seem to overlook a lot in your assessment of the government. Mainly that it is made up of people. People really do suck. They are selfish, short sighted, and generally fearful of loss.
When we forget human nature, is when we get in trouble.
The government is incredibly bloated. Much of that bloat is related to the above. They call it pork, but really its a crust. That crust builds up over time.
Someone has to scrap it off, while knowing that it will form again.
The crust doesn’t serve the goals of government. Its the political overhead that is required for humans to get past the above and get things done.
That crust forms at every level. There is no 2 trillion single mass of it. The DOGE would love that. Its going to take them A LOT of work to find it all. Sadly, much of it is going to be law and require a bigger scraper.
So, until term limits are established at every level.
VOTE OUT THE INCUMBENT.
Every time.
Can you be part of the change?
“Government is you…”
I worked for my town government for a while. Even THEN? It wasn’t me.
The “deep state” is real. I used to think it was some conspiracy garbage.
The reality is that it’s the Bureaucracy. Systems of systems that were created for control and are manipulated by power, for the concentration of power.
Just like my TV: I didn’t make it. UNLIKE my TV: I didn’t approve of any of it!
I purchased, transported and installed the TV. I have opposed the government since I can remember. The TV still works. The Government still works: for the strengthening oligarchy.
Rick – with Glen, here. Many, too many, of our fellow citizens struggle to name their Congresspersons, or understand separation of powers. Often, when I encounter someone upset about someone in Congress (think AOC or MTG), and calling for term limits, they then have the strangest look when I suggest they move to that District and work to un-elect the offender-in other words, my experience with my fellow citizens calling for term limits rarely involves discussion about THEIR OWN District’s Representative, but SOMEONE ELSE’s. Questioned about their own Representative’s policies and voting record, the response is again, too often, disappointingly thin…
may we all find a better day.
91B20… you’ve been MIA .
Bill – nah, just running out of time…
may we all find a better day.
Nice piece Wolf! I grew up in Kansas City and had no idea the government had such a big role there.
Obviously they followed Taylor Swift…
Duh
Contradictions coming out of this admin especially around Return To Office (RTO):
Need to cut spending – Telework (TW) measurably saves hundreds of millions /yr (see OPMs annual TW reports)
Need to get rid of underutilized buildings – They also don’t have enough space to accommodate RTO
Need RTO to restore DC economy – Admin wants to move agencies out of DC
Want to reduce building portfolio and leases – going to require massive investment to move the up to 20% of the 2.5 million work force out of D.C.
RTO is about reducing headcount with having to do layoffs and severance packages. New office space is a gift to the rentiers.
It’s not about critical thinking or making things better; it’s about blindly changing as much stuff as possible from the last administration.
I just came on here to say the same thing.
RTO is about fairness:
“Fairness requires that federal office employees show up to the worksite each day like most other American workers,”
It’s about DC’s economy:
“Federal office buildings sit mostly empty, particularly Washington, D.C.-area agency headquarters offices, devastating the local economy and serving as a national embarrassment”
Many contradictory reasons, but the most simple explanation is the usually the correct one:
RTO “would result in a wave of voluntary terminations that we welcome.”
Off topic except concerns DOGE: they are going to kill the penny.
And about time. Canada killed it years ago. Its biggest defender: the mint.
They wriggled when it turned out they couldn’t make one for a cent. Even with copper long gone ( as nickle from the nickle) they managed to get a deal on zinc and briefly broke even. But they loved that gig. Why? It never ended. The coins didn’t circulate. They went into jars,
But what a freaking time waster! Don’t know about USA but here most cashiers had a little jar on counter with sign: ‘Take a penny leave a penny’
But not McDonalds. Shortly before it was killed I went thru drive thru and my bill was 7.01. The kid on the till was not going to round it off. I didn’t ask. No penny jar. So start looking for floor change: not a bad haul, maybe 4 $. But no pennies. But the kid is out too and if we are going to be strict, he needs four. So he has to go and get a roll.
Another six minutes later, deal done. At home a rough calculation: it cost McD about 15 cents to collect that cent. No allowance for my time or those waiting behind me.
But it’s inflationary, merchants round everything up?
No. It’s rounded up or down at till, which leaves most prices ending in a ‘9’
but they kind of did that before. At least the nuisance of the physical coin is over.
That kid would be fired if he did not receive full payment .
McDonald’s would never allow front line employees to make decisions regarding how much money to accept from customers.
I don’t know about today, but in 1970, when I was 14 years old, I took a one page test at the McLean, Virginia McDonalds and finished the math portion so fast and accurate that the manager put me on the window (cash register), much to the chagrin of my older school mates who were flipping burgers and making shakes. I was told that for any policeman in uniform, the meal was free. I even had Willard Scott come in (he did McDonalds commercials) and his meal was free. We had the discretion to hand out any food or do what ever was necessary to be sure that the customer was happy. Armed with this information, I was never hungry hitch hiking around the United States. I was never refused when I went into a fast food restaurant complaining that when we got home there was food missing in our order.
Maybe things are different today… that was a long time ago.
I was quite the street rat back then. It was fun.
Again, Wolf has focused our attention and done the thoughtful conclusions of governmental CRE For Sale signs. A day with Wolfstreet is a day without enlightenment.
Nick – …and, by extension for some future date: “…take THAT, all you gold bugs!…”? (Best).
may we all find a better day.
How much money could be saved if the subsidy for buying electric cars was eliminated (looking at you, Elon).
How much money could be saved if the US mint stopped making one cent and five cent coins ? Just round to the nearest 10 cents at the point of sale (if paying with cash).
I doubt the people who rent buildings to the government will go along with this. I think they are more likely to cut food stamps, or some other social program before they cut anything that hurts, or might hurt, some rich f**ks in the donor class.
“rich f**ks” Not “rich f*lks” Nice touch. But I don’t think T***p gives a f**k.
The Mint is saying stopping cents and nickels would save $179M.
1.RTO is not only to end WFH but to make employees leave on their own without firing them. CRO will also gain value. Employees wont leave. They cant find a job outside. Where could anyone find a job that is not too jobby. I want to work but not worky.
2. Government offered to buy back guns. Gun enthusiasts purchased new guns with that money.
3. One time government offered credits to use the penny. People got the pennies and immediately deposited in the bank. Free credits.
4. Inflation will heat up again because lot of cheap foreign labor will not work and the local labor cost more which will be passed on to the customers.
5. People who think EV-windfarm subsidy is wasteful spending never thought in the same way about farm subsidy, oil subsidy and MIC subsidies.
6. Federal gov is not about efficiency. Any measure to improve the efficiency is going to make it lesser efficient.
7. Tariffs are inflationary in the short and medium term.
8. My executive order is to bring the only other guy who made sense in this entire comments section.
9. Lets see after the (metaphorical) honeymoon period 100 days. During April so many big planets conjuncts.
So the moral of the story is to hit my landlord for a rent decrease ASAP.
Sadly, that’s not generally how things work. You’ll need to go somewhere else, so your landlord can rent to someone else at a lower rate.
Much like a job. Your more likely to make more somewhere else, than you are for your boss to pay you what you think you’re worth. Your boss is more likely to pay next guy more, than give they are to give you a raise.
Is it pride? I don’t know, but it sure plays out that way.
I predict February federal employee buy out = 10% gone.
1) IF $2T was actually cut, the US would be in a Depression.
2) There are so many BS jobs in this country. The REAL work jobs, no one wants to do because they require real work.
3) If you can do your job from home, you have a BS job. That includes Wolf.
#3 🤣
Too much 🍸?
Wow, Wolf – you let that comment stand. Bravo! I’m glad you got a chuckle out of it. I sure did. Here’s to you, Wolf – lounging,
I mean, working at home. 🥂 🍻 Cheers! Here’s to freedom of speech!
Btw: I didn’t RTDFA.
(Purposely left out the G)
Hey Wolf,
You may see drunken sailor chip-plosion sooner rather than later.China shoulda named it DeepSix not DeepSeek.
Butterflies in the rain forest.
Every bubble eventually gets popped or pops on its own pressure, and we knew that the AI bubble — from chipmakers to utilities — would eventually pop. So is this it? Was it “deep-sixed.” as you would say so elegantly. We’ll see.
Wolf, you are self employed working at home. You are your own boss. This is very different from some guy working at home for the government or some big business. Very different motivation and work ethic.
YES,,, far damn shore,,, but, I agree with you keeping it on here and adding the emoji(s)
Hard as it is, clearly IS, keep on keeping on Wolf,,,
Annual contribution coming soon, as always due to directly savings and now many profits!!!
After those to the grandchildren and apparently
now required software updates…
Thanks again for your many clear reports and insights into this now very clear mess.
I’ve always thought of WR as a workoholic.
Well if there is only one of him(And I think that is true), he has to be!
Maybe not in the USA, but in many countries a farmer and farm owner is the sole worker on the farm. He, could be a she too, may also live in the farmhouse on the farm and can then be said to do his job from home. Do the farmer then ave a BS job. ;)
Mike,
Sound like you have a “real job”.
What are your thoughts on AI, and gravity?
Be careful…TikTok influencers are watching…. :)
Reducing space is much easier than reducing people. So, one can say, DOGE is strating at the right place.
DOGE = Drugs, Orgies, Girls, Entertainment
I’m not expecting any cost savings. Well sure, they may trim a lot of excess fat/waste, but it will all be spent on hookers and blow, or other wasteful follies.
Young work force will all be working from business district offices in a matter of a year, two.
1) Broken window fallacy. Look it up. Just because $2T isn’t transferred to the govt does not mean it won’t be spent, and probably go to “real work”.
2) Agreed that there are a lot of BS jobs, but everyone will disagree on which jobs those are.
3) And yet… here you are.
I can work from home but often go into the office because it’s quiet (kids at home), well appointed, and I have my better equipment/direct connection there.
My last comment on this subject is I ALWAYS work from home because…well…I am retired.
I like the idea of moving various departments out of the DC/NOVA area and “sharing the wealth” with the rest of the country. The IRS is HQed in DC, could be Dallas. The Social security administration is HQed in Maryland, could be Phoenix. Veterans affairs in DC could be Miami. And so on. Billions and billions in salaries, rent, etc pulled from the States and spent in one location doesn’t seem fair. Only the DOD and Department of State really need to be physically close to the actual seat of Federal government.
About 50% of the jobs in Washington D.C. should be eliminated. Doesn’t matter if they are work from home or work in the office. Entire Agencies should be eliminated. DOE, FEMA, etc. Most of their function which are necessary and justified should be turned back to the States. Why are we spending money for a new FBI building bigger than the Pentagon. The FBI building in DC should be turned into a museum and it’s functions delegated to the U.S. Marshalls service. I could go on.
Fascinating point of view. May I ask, regarding the National Nuclear Security Administration, whether you believe it would be better run by the states, or whether it is merely unnecessary?
Since the NNSA accounts for roughly half the DOE budget, you may not want to overlook it before you eliminate the entire DOE.
drydener
I meant the Dept of Education not DOE. Some functions need to be kept at the Federal level, like Defense, NASA, Weather Service. I worked in one. We did a great job for the National Defense, and American taxpayers at least until we got taken over by crooked Defense contractors.
MW: Does China’s DeepSeek AI model spell doomsday for Nvidia and other AI stocks? Here’s what you need to know.
MRVL -14.72%
AVGO -13.51%
NVDA -12.99%
I sold everything months ago. 😁
Hello treasuries! 💵
Rotating to treasuries isn’t without risk… watch out for duration.
If you ever worked doing research at a quality business or institution, you will find that some of the best ideas come from interactions at chance encounters in the hallway. You cannot get this working at home.
AGREE T2:
Been there with one of the largest USA companies doing their thing Globally.
Many idea sprang up for our branch, later put to work on the entire global biz…
Good one T2!
“you will find that some of the best ideas come from interactions at chance encounters in the hallway.”
Like, “How about a drink after work…” ??
Any cuts needed at the Federal Reserve? Have they performed better than FEMA, FHA, or other government agencies?
The Federal Reserve is not part of the US government or any Agency. They are a private bank that operates for their member banks’ benefit. They are no more part of the government than “Federal Express” package delivery company is. Or McDonald’s.
Ol’B
Common misconception here. The Fed is a hybrid organization.
The Federal Reserve Board of Governors is a government agency, and all its employees are federal government employees with a government salary and a government pension, including the seven members of the Board, including Powell. These seven members of the Board of Governors are appointed by the President and confirmed by the Senate. The Board of Governors has lots of employees, and they’re all employees of the Federal Government. They’re headquartered in the Eccles Federal Reserve Board Building, the main office of the Board of Governors of the Federal Reserve System. This is a federally owned building on 20th St. and Constitution Avenue in Washington, DC.
The 12 regional Federal Reserve Banks are private organizations that are owned by the largest financial institutions in their districts. They include the New York Fed, the San Francisco Fed, the Dallas Fed, etc. All their employees are private-sector employees.
The FOMC – the policy-setting committee – consists of the 7 members of the Board of Governors who are federal employees and have permanent votes on the FOMC. The New York Fed governor also has a permanent vote. The other 11 regional FRBs rotate into and out of 5 voting slots annually.
The FOMC is designed to give the 7 government employees a voting majority over the 6 presidents of the regional FRBs.
Thanks Wolf. Glad to be corrected.
Researching for myself – the Fed Board of Governors is an Independent Agency that does not fall under the Executive, Legislative, or Judicial branches, but is “accountable ” to them. I’m no Constitutional scholar but I do wonder then where and how their existence is authorized. By the Federal Reserve Act I suppose. Should the government be able to “spawn” new pieces of itself that aren’t part of the original plan? Maybe someone will ask that question.
Congress created the Federal Reserve System with the Federal Reserve Act of 2012. And it modified the Fed several times since then, including in the Dodd-Frank Act, that limited what the Fed could do without the government’s permission.
The “independent agency” is exactly why Trump cannot just fire Powell out of a whim. Nor can Congress. The Fed is supposed to be independent from government and is not funded by the government, so that it can pursue monetary policies that contravene big-spending free-money Congressional and White House preferences, including now, where Trump very vocally wants low rates despite inflation, and the Fed has to somehow hold the line.
All agencies have been created by Congress. Congress as the right to create agencies of the government.
so nvidia dumps because of some unconfirmed report out of china, and the algos’ response is to panic buy all the non-tech companies in the dow 30? i really don’t understand this.
Franz, your first sentence suggests you do understand this.
no i don’t.
I second thurd, Franz must be our leader, for he knows so much!
Haha
China just made US big tech look like a bunch of hucksters….
right, but dow ended up significantly because of panic buying of non-tech stocks.
From what I have read, the evidence that it has been confirmed looks pretty solid.
DM: US Markets crash by $1 TRILLION as cheap China AI sparks global tech bloodbath
Wall Street indexes sank 3 percent on Monday morning after a Chinese artificial intelligence startup triggered fears America’s top tech stocks are overvalued.
“US Markets crash…” so S&P 500 -1.5% = “crash?”
And the Dow was green, LOL, = crash?
The Nasdaq dipped 3.1% = crash?
The headlines these days are hilarious, don’t you think?
The stock market is psychotic day to day. Like Hal (from 2001) on meth with no let up. Programmed trading by computers, Hal’s spawn, are doing it. It will only get worse.
I can’t let you do that Dave.
I think most everyone is hopeful the federal government can find ways to be more efficient. But aside from the major markets Wolf mentioned, which may offer real possibilities to amalgamate office space and shed excess space (if the government is willing to invest the money in this), my hunch is that in smaller markets the ability to shed space may be limited. I’ve been to a number of government offices that are underutilized but the money necessary to reconfigure the offices to shed space often exceeds the savings which is probably why so many SSI offices and other spaces have had underused space for so many years.
Even in Wolf’s statistics, a few million square feet spread across a hundred buildings may work out to an average of 65,000 square feet per building. I know averages are too generalized but in the end, between investors pulling favors to keep leases, investors renegotiating leases, and the likeliness that much of the space is partially underused, I think it will be unlikely to see a huge change. Hopefully I’m wrong.
Now, the thousands of empty buildings- that may indeed offer some opportunity. I just don’t know enough about these buildings. How many are strip plazas and small buildings in smaller markets? Just like Macy’s and Sears, there will be some prize real estate to sell/unleash, but my guess is most will be in markets that have limited demand for the space.
Not a bad idea to do a census and find areas to consolidate and reduce usage. In my experience, most organizations rarely make smart choices when it comes to real estate. Hence the reason SF was so short space a few years ago as businesses horded space and now finds itself with a deluge of excess space.
All of these measures don’t mean squat if Trump’s first budget isn’t smaller than Biden’s last budget. Meaning if Federal spending doesn’t increase by 5% or 10%, then how serious are they.
My guess is that Trump’s budget will be higher than the previous year. The GOP talks a lot about slashing spending when a Democrat is President, but suspiciously the urge to cut spending disappears when a Republican is President.
Both Obama and Biden saw years where Federal spending declined from the previous year. In Obama’s case there were TWO consecutive years where spending decreased from the previous year.
That never occurred under Trump or Bush.
Cancelling these leases is a bold step in trimming gov’t spending.
Of course it will torpedo CRE in those markets.
But then Trump can ride to the rescue with a big federal bailout package.