Capital Ideas: Trump’s Gift to the Office Market

It was raining executive orders on President Donald Trump’s first day in office. It remains to be seen just how much many of these—like exiting the Paris Agreement, freezing pending regulations and creating an agency to collect tariffs—will impact commercial real estate investment and finance.

There is one directive from our returning leader, however, that should have a direct and powerful impact on CRE investment and finance. That is the “Return to In-Person Work” order for executive branch employees (understood to mean all federal workers).

At just 65 words, the order packs a positive punch for the Washington, D.C. and national office markets, which have been dismantled by remote and hybrid work following the pandemic.

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By November, utilization in the District had recovered to 60 percent of pre-COVID levels, according to Pacer AI. The average for the top 12 office markets is 62.9 percent. The office vacancy rate is 22.5 percent, according to CBRE, while the national average is 19 percent. So, there is definitely room for improvement.

Following the enactment of Trump’s order, District buildings—and the surrounding streets, stores and hotels—should be filled with more with occupants and visitors, and some older buildings that seem destined for obsolescence could regain some of their potential as office space.

But the impact of Trump’s executive order can extend way beyond Washington. With the federal government requiring a complete return to work by its workers, private employers of all sizes—the big ones are already starting to fall in line—will likely be emboldened to require the same, thereby weakening if not reversing the work-from-home trend.

“That by itself is enough to start making office more viable,” Lonnie Hendry, chief product officer at Trepp Inc., told me in a conversation last year.

More bodies in the office means better fundamentals for office, more investment and financing and less distress.

Efficiencies in the office

Trump’s declaration was no surprise. He and his emissaries of efficiency—Elon Musk and Vivek Ramaswamy—and Republican lawmakers had called out federal workers for their post-pandemic work habits, and District leaders have been asking for centralized solutions to get more employees back to the office, so the local economy can thrive once again. (Last year at this time, Mayor Muriel Bowser announced that municipal employees would go from two days of telework to one.)

In December, the American Federation of Government Employees, the largest union for federal employees, issued an explainer intended to dispel the myths about telework and remote work put forth by Musk and others. “If you exclude security guards & maintenance personnel, the number of government workers who show up in person and do 40 hours of work a year is closer to 1 percent,” Musk said on X.

According to AFGE, 54 percent of federal employees work at completely in-person jobs and 10 percent are fully remote. Among the subset of federal workers who are telework but not remote work eligible, 61.2 percent of working hours are spent in-person.

How does that compare to the broader population? According to the Bureau of Labor Statistics, about 23 percent of American workers were teleworking or working from home in December of 2024.

But remote work and telework for federal workers cannot be attributed to COVID alone. Following the executive order, AGFE issued a statement saying restricting telework would undermine the “effectiveness” of the federal workers since it was Congress in 2010 that required telework for the sake of efficiency.

It should be noted Trump and Musk, who leads the newly created Department of Government Efficiency, are also eager to shrink and decentralize the federal workforce. In fact, Musk is hoping the Return to In-Person Work executive order for government employees will set in motion a wave of voluntary resignations.

A smaller federal workforce would have a negative impact on Washington, D.C.’s office market and economy. But, for at least the next four years, it wouldn’t erase the message to office occupants that’s coming from the top: Office work is best done in the office.  

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