Already reeling from the pandemic and the work-from-home trend, the office market in downtown Chicago and throughout the metro area is taking another hit as the federal government, which leases space in over 100 buildings in the city and suburbs, begins to terminate many of those leases.
As part of its efforts to reduce what the new president and his aides describe as rampant waste, the Trump administration has set a goal of closing half of the government-owned properties and canceling half of the leases with private property owners.
According to Trepp Inc., a New York-based firm that analyzes commercial real estate finance industry data, the General Services Administration, which manages government-owned and federally leased buildings, pays landlords more than $91 million per year in rent for approximately 2.4 million square feet of office space in 112 properties across the Chicago area.
According to Tom Taylor, senior manager of research at Trepp, the federal government has contractual rights to terminate more than a third of those leases by the end of the year, potentially siphoning about $30 million in rent from property owners here.
Administration officials have not stated where or if they intend to relocate employees who work in those offices, or where the offices’ functions will be performed in the future.
“In a market that’s already contending with large shifts in demand from the influence of remote work, changing the office demand paradigm, any large-scale GSA terminations could really exacerbate the existing problems with vacancy and office values in that market,” according to Taylor.
Trepp data shows that some building owners with federal leases rely on them to help service their properties’ debt. However, Taylor added that federal government leases account for slightly less than 1% of total office space in the Chicago area, far less than in Washington, D.C. and some other metropolitan areas with a large federal presence, such as Kansas City.
The so-called Department of Government Efficiency, led by Elon Musk, has identified seven leases in Illinois for termination. The administration claims on the DOGE website that closing federal facilities in rented properties in Chicago, Hoffman Estates, Rockford, Rock Island, Champaign, Springfield, and O’Fallon will save the government more than $2.4 million annually.
According to the DOGE website, the Federal Transit Administration’s Chicago office would be closed, saving more than $471,000 per year. The FTA’s office for a six-state region is located in downtown Chicago at 200 W. Adams St.
According to the DOGE website, the lease for a Social Security office in Rockford and a National Archives facility in Hoffman Estates has been terminated.
The website does not provide any additional information about the leased space in the northwest suburb, but the government has rented an old furniture showroom in Hoffman Estates to store documents for former President Barack Obama’s presidential library.
That lease was already set to expire this year, according to officials, because the library will go entirely digital. DOGE says its decision on the Hoffman Estates property saved nearly $1.5 million.
For the time being, a photo of the former president and his wife Michelle Obama hangs on the wall in the building’s lobby in Hoffman Estates. A spokesperson for the Obama Foundation referred questions about the facility to officials at the National Archives, who did not respond to WBEZ’s request for comment.
DOGE claims that its online list is only a “subset” of its work with federal real estate interests, and it promises to update the data on a regular basis.
According to a GSA source, the reported lease closures are just a few of many that will be terminated in the coming months.
The source, who requested anonymity because officials had instructed employees not to speak with the media, said the leases that are about to expire include space in several other buildings in downtown Chicago, in addition to the FTA offices at 200 W. Adams.
The buildings with federal leases that would soon expire, according to the source, include office space in the Rookery Building at 209 S. LaSalle St., 231 S. LaSalle, 224 S. Michigan Ave., and 175 W. Jackson Blvd.
More than 30 federal leases in Illinois are being targeted, according to the source. These include properties in Oakbrook Terrace, Lisle, Schiller Park, Downers Grove, Naperville, and Tinley Park.
A GSA spokesperson in Chicago declined to go into detail about the planned cuts.
“GSA is reviewing all options to optimize our footprint and building utilization,” a spokesperson told WBEZ. “GSA is actively working with our tenant agencies to assess their space needs and fully optimize the federal footprint, and we’ll share more information on specific savings and facilities as soon as we’re able.”
Although some local elected officials in the largely Democratic state are concerned that the closures will significantly reduce public access to government services, Cook County Republican Leader and County Commissioner Sean Morrison believes the DOGE-directed real estate moves are receiving clear and bipartisan support from voters and taxpayers.
“The main crux of this whole thing is the use of taxpayer money,” Morrison informed the audience. “Over the last 40 years, money has been wasted.
“The entire DOGE movement is aimed at reducing generational waste that occurs on an annual basis. They truly believe that there is nearly a trillion dollars in waste each year.
Marcy Owens Test, group head of CBRE’s Federal Lessor Advisory Group, said she and other analysts are trying to get more information from administration officials about their plans for the government’s real estate dealings.
The government’s goal of reducing leases by 50% “would be a fairly dramatic cut, and that’s why it’s important to understand how the administration plans to get there,” she explained. “What is their process for achieving that square footage reduction?” And that is not clear yet.”
Owens Test noted that the federal government has been gradually reducing the total amount of commercial space it leases for more than a decade, under both Republican and Democratic presidents. She stated that leased space for federal offices has decreased by about 13% since its peak in 2013.
According to CBRE, the office vacancy rate in Chicago was 24.4% at the end of last year, and it is expected to rise further in the final three months of 2024.
Dan Mihalopoulos is an investigative reporter for WBEZ’s Government and Politics team.
