While the shock-and-awe cuts to the federal government’s real estate footprint spurred on by the Trump administration’s Department of Government Efficiency have subsided, their impacts are just being realized, a new study found

Government-leased buildings had long been seen as a safe option for investors because agencies rarely exercise their early termination options. But the shift in government policy is already upsetting the CMBS market and may generate larger private sector losses than the tax savings it set out to create, according to a study by researchers at the Yale School of Management.

“The DOGE lease terminations function not just as cost-cutting measures, but as systemic shocks with the potential to undermine CRE stability through both direct and indirect channels,” the study says. “In this setting, the DOGE intervention served as a wake-up call, revealing the latent exposure of CMBSstructures to federal lease terminations.”

In February, as the DOGE cuts were beginning in earnest, Barclays warned that the agency’s promise to cut the government’s real estate footprint risked default across $12B of CMBS loans.

Lease terminations are already creating broader uncertainty in the CMBS market, according to the study from Yale assistant professor of finance Cameron LaPoint and Soon Hyeok Choi, assistant professor of real estate finance at Rochester Institute of Technology’s Saunders College of Business.

“There’s always the risk that whoever’s in power in the government can make a change and wipe out those contracts,” LaPoint said in a statement. “But that additional risk just hadn’t really been embedded in commercial mortgage-backed securities prices.”‌

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