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Government downsizing impacting commercial real estate market

State, local and federal agencies are focused at the moment on downsizing and cutting costs. They may be laying off workers or simply moving to smaller spaces, but the downsizing is leading to government agencies seeking to lease a decreased total square footage of office space, which is impacting the struggling commercial real estate market across the U.S.

A recent article by Anton Troianovski in The Wall Street Journal discusses the issues, pressures and impacts in depth. Many landlords for businesses are feeling the sting as what they once considered stable components of their portfolios are becoming unpredictable. Some government agencies are even walking away from leases, citing little-used clauses in the commercial rental agreements.

In addition, according to the WSJ, it used to be that buying stocks of landlords who counted government agencies for tenants was considered a safer investment, but that is no longer the case. All across the country, city governments and state governments are trying to save money by moving to smaller spaces.

According to the WSJ, the city government of New York, for example, is working on a downsizing plan that it hopes will save the city $36 million. The plan is to be moved out of 1.2 million square feet of space leased by the city by 2014; the government has already moved out of 380,000 square feet since the plan was implemented.

Source:

Government Cuts Clip Office Market (The Wall Street Journal)

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