The work of the Department of Government Efficiency—DOGE—has had far-reaching impacts on the federal government, including numerous firings. Among its less well-known actions, DOGE’s cancellation and non-renewal of leases have had unanticipated consequences, challenging the long-standing perception of government contracts as a secure and stable investment.
Soon Hyeok Choi, Ph.D., and a co-author, Cameron LaPoint, Ph.D., of the Yale School of Management, have investigated the effects of these changes in federal real estate policy on the commercial mortgage-backed securities (CMBS) market, as well as spillover effects on non-federal leases. Their working paper on the topic has gained national attention.
- Winning a bidding war isn’t always a win, research on 14 million home sales shows, The Conversation
- The real-estate ‘winner’s curse’: Study of nearly 14 million home sales over 20 years shows you don’t want to win that bidding war, Fortune
- Government shutdown risks: DOGE real estate impact shows one way federal cuts can ripple across economy, CNBC
- Federal Lease Cuts Trigger Decline in Mortgage Bond Prices, Globest.com
- Government Lease Terminations Expose New CRE Debt Risk, Propmodo
- Yale Study Finds DOGE Lease Cancellations Are Already Causing Real Estate 'Shocks', Bisnow
- DOGE’s Lease Cancellations Are Already Hitting the Commercial Real Estate Market, Yale Insights
- Federal Government Lease Terminations Hitting CMBS, Inside Mortgage Finance
- Federal lease cuts would only compound Rochester's CRE office sector, Rochester Business Journal
- Early Terminations, Shutdown Shake Confidence in GSA Leases, Globest.com
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Evaluating Federal Government Lease Stability: Opportunities and Insights for CRE Owners and Investors, L. Northmarq Research & Insights
The authors’ findings explain the attention paid. “Simulations of tail risks from early termination exposure,” they write, “result in aggregate property value losses in excess of $575 million for the Washington, D.C. market alone -- well above total potential taxpayer savings from canceled lease payments.”
Summing up, Choi says, “Perceived stability isn't guaranteed stability. Despite the long-held belief that government real-estate leases are ‘safe,’ investors treated early-termination options as dormant, creating a systemic underpricing of this risk. Correctly pricing the risk raises its market salience and helps investors assess their exposure to government contracts.”
Soon Hyeok Choi is an assistant professor in the department of finance and accounting. He is a real estate and financial economist.
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This is an example of Saunders College of Business faculty research that is gaining national and international recognition by peers and the media. For media inquiries, please contact Nathaniel Smith at nlsmkt@rit.edu.
