With the government shutdown in 2025 beginning except for the end, the damage caused by Elon Musk’s Doge project is already struggling with real estate markets nationwide.
Doge is the brainchild of Elon during a brief federal stint, and is tearing the real estate industry even after leaving Washington.
As reported by Cryptopolitan, the program has cancelled 384 government leases so far, and Doge’s website claims that these cancellations have saved about $140 million, but the so-called “savings” are falling into financial disruption.
The federal government was once the safest tenants possible. Cameron Rapon, a teaching finances at Yale, said that government leases always come with a polite little cancellation clause, but no one actually uses it. The landlord considered it to be symbolic and not a real threat.
Doge changed that. “If you and I are renting an apartment and canceling the lease, there is a rent penalty for several months,” Cameron said. “But when the government cancels the lease, the landlord will remain high and dry.” Now, in cities, towns, blue states, red counties, it’s you name it. Doge’s calculation assumes that all leases have been renewed, but this is not necessarily true. Some of these offices will probably be closed anyway due to agency downsizing or movement. But the amount of closures and how quickly they happened made things worse. The government has pulled out properties large and small, ranging from the 845,000-square-foot building in DC to the 250-square-foot Secret Service office in New York City.
Landlord loses tenants and lenders loses confidence
Commercial loans nationwide are currently at risk. Cameron said the Ripple effect touches “thousands of loans” because commercial lending systems rely on large tenants like the federal government. The bank packages these loans and sells them as securities. When the anchor tenant disappears, the entire transaction can fall apart. When the government leaves, these loans lose value and raise risks nationwide. A GSA spokesperson says Doge has saved $113 million for taxpayers, but none of the GSA has spoken about what will happen to a building that is currently empty and worthless to lenders.
In Florida, real estate broker Alexi Morgado, who runs Lexawise, says he’s already seen a chain reaction. “Supply availability doesn’t always lead to immediate demand,” Alexi said. Buildings with cancelled leases are sitting in the sky, losing money, making it difficult to refinance. In some cases, owners are thinking of converting them into apartments or complex spaces. But that requires planning and resources, and not all landlords have it.
In California, Mark Beshalati, senior VP of Arbor Financial Group, says landlords need to cut large government agencies into smaller spaces. “In most cases, to mitigate what I’m going on, owners of these properties need to reconfigure the properties to fit the different types of tenant bases,” Mark said. If the bank cannot bundle the loans and stop the risk, they will raise the interest rate. “It’s a national issue,” he said. “It’s not just DC, it’s all over the country.”
Country towns brace for more federal strikes
The small town is being hit harder. Unlike big cities, rural areas are not included in most bound securities. If the lease is cancelled, there is no safety net. Cameron noted that 57% of leases eligible for early termination are out of states in the 10 most populous states, with 63% outside the largest 100 counties. Doge has already sent layoff letters to 61% of these rural offices.
In Marquette, Michigan, Mayor Michelle Hanley said closure of IRS offices is not so important as no one has actually worked since the pandemic. However, she is upset about Doge targeting the Indian Affairs Office Bureau in Baraga and the Tribal Health Centre in Sault Ste. Marie. Indigenous communities in northern Michigan are five times more populated than the state’s lower peninsula. “The cuts are going to hit hard,” Michelle said.
Tom Warren, chairman of the business division at Massachusetts Liberal Arts College, says the federal pullback reflects Keynes’ theory. Government spending stimulates the economy. But things get slower when Washington starts to withdraw money. “Downing rental income and loss of employment will reduce economic stimulation,” Tom said. “This has a ripple effect on the entire local economy.”
Meanwhile, President Trump’s administration is threatening employment cuts across agencies. Russell Vote, director of the Management and Budget, told House Republicans that layoffs could begin within 48 hours. Trump spokesperson Caroline Leavitt confirmed during a briefing that federal workers will be fired “quickly.” The bet platform believes this shutdown will last at least two weeks.
