JBG Smith Reports Widening Losses, Falling Occupancy As Trump Uncertainty Looms

Occupancy and income are heading in the wrong direction for JBG Smith, the largest REIT with a portfolio focused on the D.C. area, even before the impact of the new administration's drastic cuts to the federal workforce takes hold.

The Bethesda-based company on Tuesday evening reported a net loss of $60M in the fourth quarter, up from its $33M loss in the same quarter last year. Its full-year loss of $143M was up from its $80M loss in 2023. 

JBG Smith's funds from operations, a key metric for REITs that measures cash flow, fell to $11.1M in the fourth quarter, down from $19.5M in Q3 and $33.9M in Q4 2023.

In its earnings statement, JBG Smith attributed the loss to declining occupancy in both its multifamily and office portfolios. Its office portfolio was 78.6% leased, down 2.1% from the quarter prior. Its multifamily portfolio was 96.2% leased, down 0.8% from the prior quarter. 

The flagging performance comes as the federal government is in the process of shrinking its office footprint and workforce and ordering employees back to the office — all changes expected to impact the REIT, which receives a quarter of its annual rental income from the U.S. government.

JBG Smith CEO Matt Kelly wrote in his quarterly letter to investors that it is too early to tell what the net effect of the Trump administration’s actions will be on the D.C. region’s economy and its portfolio.  

“It is, perhaps, a gross understatement to declare the current environment unpredictable, especially for the local real estate market,” Kelly wrote. 

“On the other hand, since the pandemic the DC market has desperately needed a turnaround, both in terms of public safety and office attendance,” he added. “It could well be that the recent actions by the new Administration will deliver just that. It could also be that dramatic efforts to shrink government employment may offer nothing but more headwinds.” 

JBG's plan to maximize the value of its assets going forward hinges on aggressive stock buybacks, which it plans to pay for by continuing to sell off properties.

It sold $374M worth of properties last year, including a 345-unit Fort Totten mixed-use building anchored by Walmart and a 375K SF office building at 2101 L St. NW in December. It sold that property for $110M, but all of the proceeds went to its lender, which held a $120.9M mortgage, according to its earnings statement.

JBG also lost four L’Enfant Plaza buildings to foreclosure in October, although that transaction went unmentioned in its earnings release. Kelly wrote that the REIT's next sales will likely be from its portfolio of 16 multifamily properties.

“In a climate where office valuations are near cyclical lows with limited liquidity, the most efficiently priced source of capital will likely come from multifamily assets, specifically in DC where our holdings are less concentrated,” he wrote. 

It has already entered into an agreement to sell its last remaining multifamily asset in Bethesda, the 322-unit 8001 Woodmont Ave.

JBG Smith has for years been consolidating its portfolio in the so-called National Landing area of Arlington near Amazon HQ2, which it delivered for the tech giant in 2018. At the same time, the REIT has been making the shift away from office and toward multifamily, a task which has included undertaking a number of conversions.

But it still has 5.1M SF of offices, according to a supplemental report filed with the earnings release, concentrated in Northern Virginia. It has just one office holding left in D.C. — a 55% stake in a 210K SF property at 1101 17th St. NW, which has a loan maturing in June.

The federal government is JBG’s largest tenant. The REIT leases 1.5M SF to the General Services Administration, nearly 30% of its office portfolio, according to its year-end report.

The number is down about 200K SF from September when the REIT reported that it had 35 GSA leases totaling 1.7M SF. The GSA’s 31 existing leases with JBG bring in $67.6M in rent per year, more than one-quarter of all the rent it takes in from office tenants.

The REIT additionally has a large exposure to government contractors, including Lockheed Martin and Accenture Federal Services. It leases 1.3M SF to the contracting sector across 85 leases. Combined, contractors and government leases account for more than half of JBG's annual office rental income.  

“The federal hiring freeze, (which notably exempts national security employees), the federal employee buyout offers, and the latest executive order calling for a reduction-in-force and limits to backfilling attrition all represent headwinds to the regional economy,” Kelly wrote, noting that at the same time, the administration’s return-to-work mandate for federal employees is a counteracting force.

The company told investors it expects its earnings will continue to decrease during the first half of this year, and it expects that its ratio of net debt to earnings will widen.

The REIT bought back $171M in shares in 2024, and after buying back $32M in shares in the first month and a half of 2025, Kelly wrote that JBG has the capacity for $840M in stock buybacks.

The company also touted that it saved 8% on general and accounting expenses last year as it continues to "reorganize teams and maximize efficiency." It had several key departures last year, including Chief Development Officer Kai Reynolds, the Washington Business Journal previously reported.