The glut of government office buildings

 Market  Watch:

Efforts to shrink the federal government’s sprawling real-estate footprint that began in the Obama era have gained new urgency since President Donald Trump’s inauguration.

The incoming administration’s focus on a smaller government could create ripple effects in communities far beyond Washington, D.C., since the U.S. owns and leases one of the world’s largest property portfolios.

But any new push by Trump’s team to unload more of the government’s real estate to private owners won’t automatically spell doom and gloom for cities. It could actually help older office buildings establish their current worth, create opportunities for new owners or tenants and benefit surrounding communities hit hard by the pandemic.

“You haven’t seen a massive wave of this come to market,” said Jason Brooks, a portfolio manager at Janus Henderson Investors. “On the positive side, it could provide a legitimate clearing level for this type of office space.”

Prices for office buildings in central business districts fell another 9.3% in December from a year before, according to MSCI’s closely followed RCA commercial property-price index. They were down almost 48% on a three-year basis.

Conversions of old office buildings can be difficult, expensive and hard to pull off. But at the right price, they also can be “kind of a triple win,” as SL Green Realty Corp’s SLG -2.10% chief executive put it Thursday during the Manhattan landlord’s fourth-quarter earnings call, since conversions take obsolete office space off the market, chip away at the housing crisis and help revitalize prime central business districts.

Via executive order, Trump quickly established the Department of Government Efficiency, or “DOGE,” an advisory commission that can make recommendations to Congress on ways to modernize the federal government and to cut costs for taxpayers.

In many ways, it’s a new name for an old cause. Republicans have been putting extra emphasis on eliminating waste by the federal government, in part by taking aim at its stock of old and sparsely-used office buildings. But ridding the government of “wasteful spending” and shedding “excess properties” has been a clear focus at the White House since at least 2012.

The Wall Street Journal reported earlier this week that the Trump administration was considered selling two-thirds of the government’s office properties, citing people familiar with the matter. It also indicated a large portion of the federal office leases in D.C. could be terminated.
...

Other reports have indicated that many government employees are not coming into the offices on a regular basis.  They apparently began working at home during the pandemic and have not regularly returned to the office  That and the glut of office buildings in general have led to a depreciation in the price of office spaces.  Trump made his fortune by building offices and housing.  There is probably no one else in office now with his real estate experience.