DOGE and GSA Officials Pledge Acceleration of GSA Lease Portfolio Liquidation

The Trump administration, as part of its initial round of cost reduction efforts, has threatened to terminate the federal government’s leases in commercial buildings around the country. The target is a 50% reduction in office space occupied by the federal government. On January 27, 2025, only a week into the new administration, the Department of Government Efficiency (DOGE) announced that it already had terminated three U.S. General Services Administration (GSA) leases as the “first steps” to “right size the federal real estate portfolio of more than 7,500 leases.”

While the administration’s ambitions are unprecedented, this is not actually a new initiative. Indeed, there is a long history of efforts to save money by reducing GSA’s leasing obligations and property portfolio. And the Trump administration, through newly-appointed GSA Commissioner of the Public Buildings Service Michael Peters, appears to be already working to implement various reduction plans.

But there are limits on GSA’s ability to terminate leases. Unlike nearly all other federal government contracts, GSA leases do not contain the standard “termination for convenience” clauses that allow the government customer at any time to interrupt performance of a contract and reimburse the contractor for the cost of winding down operations. Therefore, any effort by GSA to terminate leases during what is referred to as the “firm term” of those leases — the term during which there is no “termination for convenience” right — simply because the government decides it wants to reduce the federal footprint will constitute a breach of the lease and entitle the property owner to damages.

There are, however, a few avenues for the federal government to terminate GSA leases before the end of the expiration of the lease. First, GSA leases often contain two terms: (1) the “Firm Term” during which the government has limited termination rights and (2) the remaining term. Once the Firm Term expires, the government tenant can terminate the lease by notifying the landlord. Leases often provide that the termination is effective upon the date set forth in the notice but no sooner than three or four months after delivery of the notice. So long as the tenant has fully moved out before the notice period expires, the lease terminates. Any GSA lease past the “Firm Term” period is a much more likely target for unilateral termination under the current initiative, and landlords should be prepared.

Such time-based termination provisions render a certain percentage of GSA leases terminable at will each year. Commercial real estate consulting firm Trepp recently published an analysis stating that, each year, termination rights become available in 4% to 9% of the GSA’s leases nationwide.¹ This number masks a greater impact in urban areas, where Trepp estimates that the federal government may already have termination rights for over 25% of its leases. And those numbers may be far higher in major cities like Atlanta, where the number may be as high as 45% this year.² As a result, the potential effect in some markets may be profound.

There are also, however, limited ways for the government to terminate its leases before the end of the Firm Term. Most notably, as in commercial situations, GSA leases permit termination for default by the government should the landlord fail to meet its obligations. In particular, the GSA Acquisition Manual requires leases to include a term described in 552.270-22 (Default by Lessor During the Term), which permits the government to claim default for any failure by the landlord to perform the requirements of the lease, such as failure to maintain the premises.³

Accordingly, this new administration initiative makes it critical that landlords quickly determine if the government has any basis to claim default of this kind. In addition, landlords should make sure that they have accurate and comprehensive records of repairs and maintenance, as well as records of when they received and how they have addressed any complaints from the government tenant.⁴ Landlords should be especially mindful of special requirements incorporated in their leases beyond normal maintenance, such as particular security measures or services that must be provided by the landlord. Such requirements can be complex, and GSA may attempt to rely on the landlord’s purported failure to adhere to them to justify early termination.

Finally, GSA could look to one unusual provision in its leases to essentially effect a termination. Unlike commercial leases, GSA leases typically include clauses providing for reduced rental payments upon the government’s vacation of the property.⁵ Owners should familiarize themselves with the terms of such vacancy clauses to understand what leverage the government may have, even during the “Firm Term.”

Importantly though, whether or not a lease is subject to unilateral termination, other rules of GSA leasing still apply. For example, regardless of the basis for termination, the government must set — and meet — a firm vacancy date. If the government is still occupying the leased space after that date, the landlord obtains so-called “holdover rights” that entitle the landlord to rent payments based on the market value of the property, which is often much higher than the negotiated rent in the lease. Given the aggressive and accelerated nature of the administration’s efforts to terminate leases, unprepared federal tenants may be unable to vacate within the established deadlines, presenting opportunities and leverage to landlords.

While the federal government’s interest in reducing its real estate costs is hardly new, we have entered uncharted waters. Landlords should understand their leases, the status of operations at their government-leased properties, and be ready to negotiate with their federal tenants. There may be opportunities, including negotiating with the government, to minimize the effect of threatened lease terminations.

If you are concerned about how the pledged liquidation of GSA’s lease portfolio may impact your business, and would like guidance, please reach out to any of the authors of this Advisory or your usual Arnold & Porter contacts. Our firm’s multi-disciplinary team of lawyers with extensive government contracts and leasing experience is available to advise and assist.

© Arnold & Porter Kaye Scholer LLP 2025 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.