The U.S. federal government is gradually reducing its leased office footprint, returning millions of square feet to the market as agencies reassess space needs shaped by telework, workforce changes, and efficiency mandates.
This is not a sudden contraction but a rolling release of space tied to lease expirations, early terminations, and soft-term clauses that allow agencies to exit with limited notice. Estimates based on current lease structures point to roughly 31.7 million square feet of federally leased office space projected to be canceled nationally over the coming years, according to Propmodo.Â
Washington, D.C. Leads, but Impact Is National
Washington, D.C. is seeing the most visible effects due to its concentration of federal tenancy, particularly within General Services Administration leases. Several agencies have consolidated operations or exited buildings entirely, often in older, decentralized properties.
However, this extends beyond the capital. Northern Virginia, Atlanta, Los Angeles County, Kansas City, parts of Florida, and the Bay Area all show significant volumes of federal leases nearing decision points. In metro Atlanta alone, more than 1.5 million square feet sits in leases where termination is possible with short notice.
Lease Flexibility Determines Near-Term Risk
Market exposure varies less by total federal presence and more by lease structure. Firm-term leases limit near-term exits, while soft-term and holdover leases allow agencies to terminate within months. Most current reductions are occurring in the latter category, creating uneven and market-specific impacts.
Older Office Buildings Most Affected
The majority of space being returned is Class B or B-minus office stock, long favored by federal tenants for cost and security reasons. In the current leasing environment, these buildings face limited private-sector demand, increasing pressure on owners and accelerating decisions around reinvestment or conversion.
Federal lease cancellations are unlikely to destabilize office markets broadly. The volume is meaningful but released gradually and concentrated in assets already under pressure.Â
For landlords and municipalities, the change signals adjustment, not collapse, as one of the office market’s most stable tenants becomes more selective about where and how it occupies space.
