Real Estate Effect of Trump, Musk’s Federal Office Downsize

The plan to shrink the federal government started as an ambitious proposal: a sweeping effort to slash agencies, cut regulatory staff and relocate government offices out of Washington, D.C., to reduce bureaucracy.

Originally floated by Donald Trump and backed by Elon Musk, the initiative aims to create a leaner federal workforce and shift economic influence away from traditional government hubs. At its core is an executive order requiring agencies to map out their exits from D.C. by mid-April and move to less-costly locations.

The Department of Government Efficiency, led by Musk, has already claimed victories — 254 terminations, $114.7 million in annual lease savings and a total of $255.3 million cut. But real estate pros are raising eyebrows at some of these figures.

The agency’s “Wall of Receipts,” a running tally of cuts, includes leases that were set to expire anyway, raising questions about the impact.

Despite gaining traction, the effort faces logistical and political roadblocks.

Previous downsizing attempts, including during Trump’s first term, ran into resistance from Congress, unions and local economies reliant on government jobs. Restructuring federal agencies isn’t as simple as signing an order. Eliminating departments or relocating them requires extensive legal and logistical maneuvering.

In Chicago, where Trump and Musk aim to cut the federal footprint by 50 percent, the effort faces a brick wall of security constraints and market challenges.

Take the John C. Kluczynski and Ralph H. Metcalfe buildings — two federal properties in Chicago’s central business district. They sit next to a federal courthouse, making security a major issue. Developers aren’t exactly lining up to take on buildings that could come with restrictions on sightlines into court facilities. Even if sold, repurposing these properties could be a multi-year endeavor requiring deep pockets and patience.

Then there’s the matter of lease terminations. Many government leases have firm terms, meaning they can’t simply be abandoned without financial consequences. Breaking them prematurely could lead to expensive lawsuits or settlement negotiations, reducing the very savings Musk and Trump are promising.

For landlords reliant on government tenants, the outlook is uncertain. The federal government has long been a stable, long-term and creditworthy tenant. Meanwhile, cities vying to attract relocated federal agencies may see a boost. Secondary markets with lower costs of living and ample office space could emerge as winners in the shake-up.

Beyond the axing of federal offices, there was plenty of news this week. A new lawsuit against the Alexander brothers named Douglas Elliman and former CEO Howard Lorber, the industry reacted to Trump’s plan to replace EB-5 with a “golden visa” and Charles Cohen made a last-ditch effort to settle with Fortress.

Lawsuit accuses Howard Lorber, Elliman of enabling Alexander brothers

A new lawsuit against Tal, Oren and Alon Alexander accuses Douglas Elliman, its former CEO and chairman Howard Lorber and their parents of enabling the brothers’ alleged sex trafficking scheme. The complaint alleges Lorber and their parents provided money and resources to the brothers to sexually abuse women and accuses Elliman of negligent hiring, retention and supervision of the brothers.

“Nobody saw this coming”: Trump’s plans to kill EB-5 shocks industry

The industry was blindsided by Howard Lutnick’s announcement that a second Trump administration would seek to end EB-5 and replace it with a $5 million “golden visa.” Trump claims the new visa would help pay off the federal deficit, but industry leaders expressed doubts given the financial and regulatory hurdles for foreign investors.

Look who wants to settle now: Charles Cohen asks court to delay $187M judgment

Charles Cohen suffered a major legal blow when he lost his appeal to block Fortress Investment Group from collecting on a $187 million personal guarantee tied to his $534 million loan default. But a day after the Appellate Division kicked the legs out from under him, the billionaire office landlord is back on his knees asking a lower court for salvation.

Gen Z takes over Newmark: Insiders question Lutnick sons’ new roles

Howard Lutnick raised eyebrows last week after he named his 28- and 27-year-old sons to leadership roles at Cantor Fitzgerald and Newmark. Industry insiders view the moves as largely symbolic, as Lutnick loyalists like Barry Gosin and legal chief Stephen Merkel were elevated to key positions to maintain the status quo.

Rent-stabilized building sells for $285K — a 97% value cut

A rent-stabilized building in Manhattan sold for $285,000 — a staggering 97 percent drop in value from its last sale price of $8.8 million in 2016. The sale signals deep distress in New York’s rent-stabilized market, which has been hammered by the state’s 2019 rent law limiting landlords’ ability to raise rents.

Karolina Kurkova, husband allege Fisher Island Club illegally targeted them

Model Karolina Kurkova and her husband, broker Archie Drury, are suing the Fisher Island Club, alleging its board illegally expelled them and engaged in intimidation tactics. The lawsuit claims two board members, both tied to Douglas Elliman, used their positions for personal gain, including steering brokerage deals on a prime development site.

Crespi Estate hits market as most-expensive listing in Texas

Dallas’ most opulent estate hit the market today asking $64 million, an increase from its price a few years ago but with a bonus of almost four acres this time around. The Crespi Estate, which ranks as Texas’ most-expensive listing, was designed by Swiss architect Maurice Fatio for Italian Count Pio Crespi in the late 1930s.

—Mike Romano