As a commercial real estate agent in Cheyenne, Wyoming, I’m committed to keeping you informed about market trends that could affect your investments. One emerging factor is the Department of Government Efficiency (DOGE), a federal initiative aimed at reducing government spending and optimizing operations. DOGE’s aggressive push to cut federal office leases is making waves in commercial real estate markets nationwide, and Cheyenne is no exception. In this blog post, I’ll explore how DOGE could impact government leasing in our area and what this means for you as a real estate investor.
What is DOGE, and Why Does It Matter?
The Department of Government Efficiency, established under the Trump administration, is tasked with streamlining federal operations and cutting costs. A key focus is reducing the federal government’s real estate footprint, particularly through terminating or downsizing leased office spaces. According to recent reports, DOGE has already canceled approximately 748 federal commercial real estate leases nationwide, totaling 9.6 million square feet and saving an estimated $660 million. In Cheyenne, where government and military facilities like F.E. Warren Air Force Base drive economic stability, these changes could have a direct impact on the commercial real estate market.
The Federal Leasing Landscape in Cheyenne
Cheyenne’s economy benefits from a strong government presence, with federal and state agencies occupying office spaces that provide stable, long-term tenants for commercial properties. Historically, government leases have been a safe bet for investors due to their high credit quality and extended terms, often averaging 14 years compared to 5–10 years for private-sector tenants. However, DOGE’s cost-cutting measures are reshaping this landscape.
The General Services Administration (GSA), which manages federal leasing, currently oversees about 1.7% of the total U.S. office inventory across more than 1,800 cities, including Cheyenne. While this may seem small, the GSA’s leased space in Cheyenne supports local office markets, particularly in areas near government hubs. DOGE’s goal is to reduce the GSA’s leased portfolio by up to 50%, following a 13% reduction between 2013 and 2024. This could mean fewer federal tenants or smaller space requirements in our market.
How DOGE Could Affect Government Leasing in Cheyenne
- Lease Terminations and Downsizing: DOGE has already terminated leases totaling 3 million square feet nationwide, with another 74 million square feet set to expire during the current administration. In Cheyenne, where federal agencies occupy modest but critical office spaces, even a small number of lease terminations could increase vacancy rates. For example, a 10% reduction in GSA-leased space nationally would raise the U.S. office vacancy rate by 20 basis points, with localized impacts in markets like ours.
- Shift to Smaller, More Efficient Spaces: Federal agencies are being directed to optimize space utilization, often moving to smaller footprints. This trend, which began with policies like “Freeze the Footprint” (2012) and “Reduce the Footprint” (2015), has already reduced the federal footprint by 23 million square feet between 2012 and 2023. In Cheyenne, this could translate to agencies consolidating into smaller offices or sharing facilities, reducing demand for larger office spaces.
- Increased Property Disposals: DOGE is pushing for the sale of underutilized federal properties, potentially releasing buildings onto the private market. In Cheyenne, this could create opportunities for investors to acquire properties at competitive prices, especially if they’re located in high-demand areas. However, repurposing these properties (e.g., converting offices to multifamily housing) may require significant investment and navigating complex zoning regulations.
- Uncertainty from Return-to-Office Mandates: The Trump administration’s mandate for federal employees to return to the office full-time adds complexity. While this could stabilize demand for some office spaces, DOGE’s simultaneous push to cut leases may prioritize cost savings over maintaining current footprints, creating uncertainty for landlords in Cheyenne.
What This Means for Real Estate Investors in Cheyenne
As a real estate investor, these changes present both challenges and opportunities. Here’s how you can navigate DOGE’s impact on government leasing:
Challenges:
- Higher Vacancy Risks: If federal tenants vacate or downsize, office buildings in Cheyenne could face increased vacancies. This is particularly concerning for properties heavily reliant on government leases, as filling these spaces with private-sector tenants may take time in a market with limited corporate demand.
- Lower Rental Income: Smaller federal footprints could reduce rental revenue for landlords, especially for larger office properties. Investors may need to adjust pricing strategies or offer incentives to attract new tenants.
- Financing Concerns: Approximately $12 billion in commercial mortgage-backed securities (CMBS) loans are tied to government-leased properties nationwide. Lease terminations could strain property valuations, affecting refinancing options for investors.
Opportunities:
- Acquiring Federal Properties: The disposal of federal buildings could unlock unique investment opportunities. Properties sold through auctions or the Federal Asset Sale and Transfer Act (FASTA) may be available at below-market prices, offering potential for redevelopment into residential, retail, or mixed-use projects.
- Repurposing Office Spaces: With office vacancies potentially rising, investors can explore converting underperforming office buildings into multifamily housing or coworking spaces. Cheyenne’s growing population and steady demand for rentals make this a viable strategy.
- Targeting Non-Government Tenants: Diversifying tenant mixes by attracting private-sector businesses, such as healthcare providers or small manufacturers, can mitigate risks. Cheyenne’s stable economy and proximity to major employers make it attractive for these tenants.
- Capitalizing on Opportunity Zones: If sold federal properties are in designated opportunity zones, investors could benefit from tax incentives under the Tax Cuts and Jobs Act, enhancing returns on redevelopment projects.
Strategies for Investors
To thrive in this evolving market, consider these actionable steps:
- Conduct Thorough Due Diligence: Before investing in properties with government tenants, review lease terms and expiration dates. Focus on “soft-term” leases, which allow termination without penalty, as these are most at risk.
- Diversify Your Portfolio: Reduce reliance on government leases by investing in mixed-use or industrial properties, which are in high demand in Cheyenne. The local market currently offers 222,308 square feet of industrial space for lease, reflecting strong logistics and manufacturing activity.
- Partner with Experts: Work with a local commercial real estate agent (like me!) to identify properties with strong fundamentals and navigate the complexities of federal leasing changes. I can provide market insights and connect you with property management teams to maximize returns.
- Monitor DOGE Developments: Stay informed about DOGE’s lease termination announcements and GSA disposal plans. Subscribing to industry newsletters like CRE Daily can keep you ahead of the curve.
The Bottom Line
The Department of Government Efficiency’s push to reduce federal leasing is a double-edged sword for Cheyenne’s commercial real estate market. While it poses risks of higher vacancies and lower rents, it also creates opportunities to acquire and repurpose properties in a growing city with a stable economy. As your local commercial real estate expert, I’m here to help you navigate these changes, identify high-potential investments, and build a resilient portfolio.
Ready to explore opportunities in Cheyenne’s commercial real estate market? Contact me at (307) 316-2239 or visit my website to schedule a consultation. Let’s work together to turn challenges into profits!
Disclaimer: This blog post is for informational purposes only and does not constitute financial or legal advice. Always consult with a professional before making investment decisions.