GSA targets early-termination leases in Greater Washington

GSA in collaboration with DOGE, is intensifying efforts to reduce the federal real estate footprint by targeting leases with early termination clauses, reports the Washington Business Journal. This strategy allows for swift cost-saving measures by ending lease agreements before their scheduled expirations.​

In the Washington metro area, fifty-eight GSA leases, encompassing approximately 2.1 million square feet, are identified as having early termination options between now and 2028. These leases are distributed as follows:​

• Washington, D.C.: Approximately 702,000 square feet.​
• Virginia: Nearly 1 million square feet, primarily in Fairfax and Arlington counties.​
• Maryland: About 432,000 square feet, evenly split between Montgomery and Prince George’s counties.​

Real estate firm CBRE's analysis indicates an even higher impact, reporting 60 leases totaling approximately 2.75 million square feet in the region are cancellable due to their "soft term" status. This refers to the lease period after the firm term, during which the GSA can terminate the lease with proper notice, typically around 120 days, without incurring penalties.​

Notable leases with early termination options include:​

• 7681 Boston Blvd., Springfield, VA: 108,000 square feet, terminable beginning October 2025, expiring in 2029.​
• 1305 East-West Highway, Silver Spring, MD: 84,000 square feet, terminable since 2023, expiring in 2028.​
• 6511 America Blvd., Hyattsville, MD: 54,000 square feet, terminable beginning March 2025, expiring in 2027.​

The GSA's lease inventory serves as the primary source for this information, though discrepancies can occur. For instance, George Washington University, the landlord for the State Department's passport office at 600 19th St. NW in DC, disputes the GSA's listing of a 463,000-square-foot lease as having a termination option, stating no such clause exists.​

The federal government's focus on leases with early termination clauses is part of a broader initiative to optimize space utilization and reduce costs. Factors influencing termination decisions include space utilization rates, the nature of the space (specialized vs. standard office), and financial implications related to build-out costs.​

The potential termination of these leases poses significant implications for the local commercial real estate market, particularly in areas with high concentrations of federal offices. Landlords and stakeholders are advised to monitor developments closely and assess the impact on occupancy rates and property values, per the Wall Street Journal.