Trump Victory Elicits Fear In D.C’s Downtrodden Commercial Real Estate Industry

Donald Trump achieved a resounding electoral win Wednesday morning, giving the former president a second term. The Republican Party also retained control of the Senate, and while the House had yet to be decided as of Wednesday evening, Republicans were closer to a majority.

The change in power could have long-lasting implications on the nation’s capital and the surrounding region. The federal government is D.C.’s largest office occupier and employer, and it draws ancillary demand from sectors that do business with it, meaning changes to federal agencies’ workforces and footprints could have major implications for the city’s office market and economy.

How the Trump administration and Congress will handle issues like federal in-office policies, agency funding levels and real estate decisions remains to be seen. The issues weren’t part of his main messages on the campaign trail, where he focused on immigration and the economy, but his last term in office and the statements he has made since provide an indication of his goals. 

And they are areas where the president has the authority to enact sweeping changes. 

“Immediately, the two important things that the president has control over is what happens to the federal workforce, and then what happens to federal buildings,” D.C. Policy Center Executive Director Yesim Sayin told Bisnow.

What exactly will happen is a source of disagreement among several local office owners, brokers and researchers who spoke with Bisnow. Some think the effects on D.C. will ultimately be minimal, while others anticipate moves toward relocating agencies out of D.C. or eliminating them completely.

“There are scenarios where things could be just dramatically different and scenarios in which things are dramatically the same, in terms of office space, real estate, federal footprint, things like that,” Savills Vice Chairman Tom Fulcher said. 

During the first Trump administration, the president pushed to relocate agencies out of D.C. and unraveled the plan for a new FBI headquarters in the suburbs.

“Trump is likely to try to disperse the federal bureaucracy out of the National Capital Region,” said Cushman & Wakefield Executive Chairman Darian LeBlanc, a top government office broker. “That was something that we saw glimpses of during his first term that we will probably see a renewed effort behind, and probably with a lot more priority and urgency.”

During his first term, Trump moved two Department of Agriculture agencies to Kansas City, Missouri, and attempted to move the Bureau of Land Management to Colorado, a relocation the Biden administration reversed.

Trump also reversed the plan that started under the Obama administration to move the FBI’s headquarters from D.C. to the Maryland or Virginia suburbs. The Biden administration has since revived that plan and selected Greenbelt, Maryland, for the new headquarters.

During the final months of his last administration, Trump issued an executive order, Schedule F, that reclassified a chunk of federal staff into an “at-will” category, which would make it easier to fire them. Biden reversed the order.  

This election cycle, Trump said he wants to shut down the Department of Education.

In September, he said he would create a “government efficiency commission” to cut federal programs and said Tesla founder and billionaire Elon Musk had agreed to lead it. Musk, who Trump said came up with the idea, promised to identify $2T in federal budget cuts. 

Meanwhile, the Project 2025 agenda — which Trump has distanced himself from but which was engineered largely by individuals connected to his prior administration and published by The Heritage Foundation — calls for firing federal workers and shutting down “wasteful and corrupt” bureaus, The Wall Street Journal reported.

Cutting federal agencies or moving them out of the capital could have dramatic effects on D.C.’s already struggling office sector. The market was 22.7% vacant as of the third quarter, according to CBRE, and office buildings in the District’s downtown are plummeting in value.

“Everyone in this business that deals with federal government real estate is terrified,” one federal leasing broker who declined to be identified due to the nature of their work told Bisnow. 

“Every office building owner in D.C., Maryland, Virginia that leases space to the federal government is nervous, very nervous, about what may happen,” the source said.

Not everyone in the real estate industry agrees that changes to the federal workforce or footprint will be at the forefront of Trump’s agenda. 

Paul Dougherty, president and chief investment officer of D.C. office owner PRP Real Estate Investment Management, said Trump’s messaging about agencies moving out of the capital region is one of his “scare tactics” and unlikely to play out.

“They need to be in this city and they will be in this city,” he said. “There won't be moving agencies to different parts of the country. I doubt that's going to happen. It was tried in the past and it was a failure, and it’s not an efficient way to govern.” 

The move to relocate agencies out of D.C. was introduced on the later end of Trump’s first term, but LeBlanc said that if it is a priority from the start this time around, it could be hard or impossible to reverse. 

He said the downsizing of certain federal agencies is also very much on the table, giving examples like the Environmental Protection Agency, National Institutes of Health, Centers for Disease Control and Prevention, Food and Drug Administration, Department of Energy and Department of Homeland Security.

“These are all agencies I think that we can expect to see major policy shifts,” he said. “And that will probably affect the federal workforce, and therefore affect commercial real estate in the National Capital Region.”

The FBI’s planned move to Greenbelt could also be in jeopardy, and Trump could reverse it quickly if he wants, experts told Bisnow. 

“There are things that Trump can impact immediately,” Sayin said. “That includes, for example, the FBI project. He was vocally opposed to it, and he can basically undo that deal and pick somewhere else in Virginia. He's not particularly fond of Maryland, either.”

This spring, Trump posted on Truth Social that the FBI headquarters should be in D.C.

“THE NEW FBI BUILDING SHOULD BE BUILT IN WASHINGTON, D.C., NOT MARYLAND, AND BE THE CENTERPIECE OF MY PLAN TO TOTALLY RENOVATE AND REBUILD OUR CAPITAL CITY INTO THE MOST BEAUTIFUL AND SAFEST ANYWHERE IN THE WORLD,” he wrote.

LeBlanc said he believes the next administration will be a nail in the coffin for the relocation.

“I think that we can expect that that FBI project will be canceled,” he said. 

Several sources said it is likely Trump will push federal workers to return to the office in a more forceful manner than Biden did. D.C. officials have called on Biden to bring more workers back to help revive the city’s downtown, and the Biden administration issued memos to the agencies telling them to bring more employees back to the office more days a week, but return efforts have been stymied by labor unions.

Dougherty said he expects Trump will issue an executive order to get agencies back.

“I think that'll be good,” he said.

Sayin and LeBlanc noted that the Biden administration was hampered by union control. 

“I don't think that Donald Trump will have any problem whatsoever engaging in actions that run counter to what the federal employee unions want,” LeBlanc said. “He's in no way beholden to them.”

“I’m just not sure a Trump administration wants to see federal workers back in any capacity, to be honest with you,” he added. “I think that they probably want to see a wide-scale downsizing of many federal agencies, period.”