This past spring, as Elon Musk’s Department of Government Efficiency (DOGE) unleashed the largest wave of federal lease terminations in U.S. history, Yale SOM’s Cameron LaPoint was instructing his business school students in the world of commercial real estate investing.
While DOGE rapidly cancelled leases on office spaces occupied by workers from the Department of Education to the Internal Revenue Service, LaPoint and students were practicing evaluating portfolios of commercial properties and parsing leasing data to understand a recent shock to the commercial real estate market: the shift to remote work during and after the COVID-19 pandemic.
After class, as LaPoint scoured news stories on DOGE’s terminations—part of the Trump administration’s efforts to drastically reduce the size of the federal government—and read online chatter from real estate market investors and landlords, he began to understand that another seismic shift in commercial real estate was underway.
There’s always the risk that whoever’s in power in the government can make a change and wipe out those contracts. But that additional risk hadn’t been embedded in commercial mortgage-backed securities prices.
LaPoint watched worries spiral among investors, property owners, and economists about the potential impact of lease cancellations from the General Services Administration, the government’s main landlord for most civilian office space. Terminations and empty offices threatened the financial well-being of landlords struggling with post-pandemic vacancies, stakeholders said with alarm. Nearby businesses could falter, too.
But the fallout also had the potential to be much broader, experts warned, triggering crashes in the securities tied to properties impacted by lease cancellations. At the time, Barclays estimated some $12 billion in commercial mortgage-backed securities market (CMBS) loans were tied to government-leased buildings. Until DOGE, investors had considered government leases among the safest of investments, with their long terms—14 years on average versus five to ten for private-sector tenants—and stable payments.
In March, LaPoint visited the Rochester Institute of Technology and fell into conversation with Professor Soon Hyeok Choi about DOGE and the increasingly agitated online chatter. Together, the two set out to investigate how the sudden, unprecedented cancellation of federal leases affected the commercial real estate debt market.
The study is the first of its kind to identify and document a new type of risk in the bond market for securities tied to government leases. “The question we were interested in was: What should we expect these termination listings to do to the pricing of commercial mortgage-backed securities?” LaPoint says.
The researchers started scraping the DOGE website, pulling data on federal leases the government had listed for cancellation from when DOGE’s site went live in mid-February 2025 to the present. At the listings’ peak, DOGE announced 793 federal leases for cancellation, representing some nine million square feet of office space. Most recently, as of August 20, 2025, the DOGE site identifies 384 leases up for cancellation.
LaPoint and Choi also pulled federal lease inventory information from the GSA website, which showed an inventory of 7,535 total GSA leases as of December 2024, plus bond, loan and property information from data and analytics firm Trepp. They found that GSA properties are significantly overrepresented in the CMBS market relative to non-GSA ones.
Unique to GSA leases are early termination options, or ETOs, which the government can choose to exercise to end the lease, typically after a five-year period and with 90- to 120-day notice. Historically—even during the pandemic—the government has rarely acted on ETOs, giving investors a sense of security in commercial mortgage-backed bonds linked to government leases. The researchers wondered: How would investors respond to the government suddenly acting on these ETOs?
“There’s always the risk that whoever’s in power in the government can make a change and wipe out those contracts,” LaPoint says. “But that additional risk just hadn’t really been embedded in commercial mortgage-backed securities prices.”
LaPoint and Choi created a model to test the financial fallout from GSA lease cancellations. They focused on the Washington, D.C., area, which ranks first among metro areas in average square footage subject to the early termination notifications, and on lower-rated “junk bonds” in the CMBS market.
They linked seven D.C. property leases up for termination by DOGE to their respective 74 commercial mortgage-backed securities Then, they analyzed property data and compared bond prices to securities tied to GSA leases DOGE didn’t list on its website.
The researchers found that DOGE’s aggressive lease cancellation policy reduced landlords’ net operating income by 5% from February to June. “This is adding to the woes of a commercial real estate market that’s been hurt by the pandemic and people settling into hybrid work, despite calls for everyone to return to the office,” LaPoint says.
Losses drove down property values. That, in turn, translated to lower prices for CMBS junk bonds linked to DOGE-listed leases. Over the same five-month period, junk-bond-rated CMBS securities tied to DOGE leases listed for termination saw a 4% larger price drop than securities tied to GSA leases not targeted by DOGE, but soon eligible for early termination. The decline shows investors are no longer ignoring the possibility that government contracts could be terminated early—they demand a higher return for their risk.
“This big wave of cancellations is a wake-up call for financial markets and investors who long thought investments with government leases were safe,” says LaPoint. “It suggests that a repricing of risk was needed in this area that seemed super safe.”
Meanwhile, LaPoint and Choi discovered a spillover effect: properties near DOGE-notified buildings saw a drop in net operating income, too, and prices for CMBS junk bonds linked to their leases fell. But they wanted to confirm that that decline stemmed directly from the shock to the real estate market, rather than from the DOGE-driven reductions in federal employees that were happening at the same time. An analysis of Advan Research cellphone location data found no change in visits to retail establishments near properties affected by DOGE’s cancelled leases. “This is consistent with our story that it’s the shock to real estate debt markets and not the reallocation of the federal workforce that matters for the performance of surrounding properties,” LaPoint says.
Using their model, they ran a simulation to estimate the potential broader economic losses linked to DOGE’s property listings over the next five years. The government has insisted that lease terminations are saving U.S. taxpayers money, though it has scaled back savings claims in recent months after scrutiny.
LaPoint and Choi found that potential losses from DOGE’s actions to the Washington, D.C. commercial real estate market alone could be as high as $575 million over the next five years—a conservative estimate, LaPoint says. That drop in value would translate into a loss of $50 million in property tax revenues for D.C. over the same period. In March 2025, when DOGE lease termination rates were highest, savings from terminated D.C. metro area leases would have been just around $76 million, a figure that pales in comparison.
“The value loss for just D.C. almost cancels out savings from all lease cancellations nationwide,” LaPoint says. “Efforts clearly fail a cost-benefit analysis.”
The researchers suggest this newfound source of risk in the commercial mortgage-backed market could exacerbate losses for the regional banks that were already losing money after the value of commercial office buildings dropped in the wake of the pandemic.
“It has the potential to magnify troubles,” says LaPoint.