As Market Heats Back Up, DOGE Uncertainty Looms Over Fairfax

Fairfax County has tens of thousands of federal workers and a huge government contracting sector, leaving it vulnerable to potential spending cuts from the incoming Trump administration — and Elon Musk's Department of Government Efficiency. 

Shortly after the election, county supervisors voted to direct the county executive to analyze the potential impacts of a Donald Trump presidency on federal employment, commercial real estate and other factors. 

“Any attack on our federal workforce is an attack on Fairfax County,” County Board Chairman Jeff McKay said at a Nov. 19 meeting, according to FFXnow. “The immediate economic risk … is significant.” 

At Bisnow’s Fairfax State of the Market event last month, local commercial real estate executives expressed concern about what the anticipated moves by the Trump administration could mean for the county. But they also said the submarket has proven to be resilient.

Cityline Partners Managing Director Donna Shafer, whose development firm is behind the Scotts Run project in Tysons, said she applauds McKay for making a “bold statement” on the incoming Trump administration's impact on the county.

“I think he was speaking on behalf of folks like us in the commercial real estate industry that worry about the health of our tenants as government agencies go away,” she said onstage at The Hyatt Regency Reston. “And he's also speaking on behalf of his constituents, who are residents and employees of the federal government.”

Virginia's 11th District, which includes Fairfax County and the City of Fairfax, has 52,000 civilian federal employees making up 12% of its workforce, putting it not far behind the District of Columbia's 71,000 workers, according to the Congressional Research Service’s December report. Fairfax County's businesses have $38B in federal contracts, according to the county's economic development arm. 

Major federal leases in the county and city include the Defense Intelligence Agency's 523K SF space at 12310 Sunrise Valley Drive in Reston and the U.S. Citizenship and Immigration Services' 154K SF office at 2657 Prosperity Ave. in Fairfax. 

Trump tapped business leaders Musk and Vivek Ramaswamy to lead the Department of Government Efficiency, an advisory body that will find places to cut government spending. Musk initially said he aims to cut $2T annually, though he walked that back Wednesday and said it may not reach that figure but has a “good shot” at reaching $1T. 

The president-elect said in December that federal employees who did not return to the office would be fired, and in a Wall Street Journal opinion piece in November, the DOGE team wrote that the wave of terminations such a policy would ignite would be “welcome.”

There are also expectations that the Trump administration could again try to move some agencies out of the D.C. region, as it did under the last administration. 

“I actually had a nightmare about the DOGE. I’m not kidding you,” Shafer said said at the Bisnow event. “I have no idea what the impact will be, when, how, how much, but it definitely keeps me up at night.”

With interest rates beginning to come down and the capital markets opening back up, the region should be primed for a strong recovery, EYA President and CEO McLean Quinn said.

Positive signs have emerged in Northern Virginia's multifamily sector, which recorded $3.6B in property sales last year through mid-November, more than double 2023's full-year volume, according to CBRE. Northern Virginia's office market recorded 116K SF of positive absorption in the fourth quarter, and its full-year leasing activity was 13% above 2023 levels, CBRE reported. 

But the region now faces a new kind of uncertainty with the incoming Trump administration and the DOGE initiative. 

“We are at a place where we should start, as the coastal markets do, leading a commercial real estate recovery, and then you have the counteracting force of the DOGE, right? And ‘The Donald,’” Quinn said. “I think if you were to put that aside, I would be very optimistic.”

He said his company, which mostly develops residential projects, is launching efforts to begin financing for projects that it has been sitting on for a year and a half due to the loosening of economic fundamentals. 

But he is looking to see how much of what DOGE says it’s going to do “sticks.” 

“I don't think anyone thinks Elon Musk actually has the patience to see this thing through,” Quinn said, adding that even so, new policies that could come from the Trump administration, like tariffs, will cause additional uncertainty. 

“I would like to say that we got the election over with, we got certainty, we got rate cuts, we're going to get another one — that's great. I don't think the uncertainty is over,” he said. 

Though shifts in government workers and footprints would likely have an impact on Fairfax Couty, panelists noted that the region still has a lot going for it. 

“The infrastructure doesn't go away, right?” Quinn said, pointing to investments in transit and mixed-use neighborhoods in the region. “So some of those fundamental infrastructure things will continue to attract diversified employers. It's just what's the lump that we might take in the next 12 to 24 months? Hopefully it's a blip and that's it.”

Panelists also cited the region's historic ability to adapt to change. Nearby Crystal City reinvented itself over the past decade after it lost thousands of defense and military jobs and millions of square feet of government-leased space through the Base Realignment and Closure initiative. That left a swath of aging office buildings vacant, but then Amazon sparked a recovery for the neighborhood when it selected it for its second headquarters in late 2018. 

“Amazon, I think, is a great example of a company that chose D.C. because they think the region has a good quality of life,” Capital City Real Estates’s Chris Love said. “We've been a magnet for talented people for some time. And this office space they took, where they're building their second headquarters, that was all government offices.”

“So I'm trying to be a little more positive and think that who knows what's going to happen, but obviously we've had government shifts before and good things come out of it sometimes," he added.