One of X owner Elon Musk's proposed initiatives at the Department of Government Efficiency has been to sell off buildings used by government workers for a quick injection of cash into federal coffers.
However, as The American Prospect's David Dayen explains, the timing of such a sale could be bad at the moment given the current precarious state of the commercial real estate market.
In his latest analysis, Dayen talks to experts who believe that a mass selloff of government real estate at the moment is like "playing with fire" and could be a domino that sends the market for commercial real estate into a downward spiral.
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"Older office space is experiencing record vacancy levels, with owners struggling to refinance the buildings," writes Dayen. 'Putting large amounts of it on the market could have dramatic consequences, including damaging the economy in cities like Washington, D.C. It could lead to widespread defaults in financial securities linked to commercial mortgages. And if unchecked, that could lead to broader pain."
Dayen also interviews Stijn Van Nieuwerburgh, a professor of real estate and finance at the Columbia Business School, who argues that "every additional shock is painful" to the commercial real estate market and that he's unsure if the team at DOGE has "thought this fully through."
Things get particularly dicey given the exposures that many banks have to commercial real estate loans, and a major erosion in property values could even spur bank panics, writes Dayen.
"The GSA fire sale is a recipe for generating tons of distress in a market that’s already in trouble, and it could spark something that rages out of control," he warns.
