Funding freezes, employee buyouts and scrutiny of the federal office lease portfolio were among the actions taken by the White House and its Department of Government Efficiency (DOGE) this week, as the Trump Administration acted on promises to shrink the federal government.

Federal Funding

• On Monday, the Office of Management and Budget (OMB) issued a memo implementing a "Temporary Pause" on certain federal financial assistance programs. (Politico, Jan. 28)

• This directive aimed to stop federal loans and grants “implicated” by seven recent executive orders pertaining to areas such as clean energy, DEI initiatives, transgender rights, and foreign aid.

• By Wednesday, OMB issued a 2-sentence memo rescinding the temporary pause, with the goal to moot the lawsuit filed in the interim that resulted in a federal court restraining order placing the spending freeze on ice.  (NYT, Jan. 28) (The Hill, Jan. 29)

• OMB’s reversal does not lift previous holds on funding of programs disfavored by the administration. Underlying Executive Orders remain in effect regarding the U.S. withdrawal from the Paris climate treaty, “unleashing” American energy resources with a preference for oil and gas development, and abandoning federal DEI programs.

• The administration may also issue future spending freezes. (Politico, Jan. 29) The administration will continue to reshape federal spending policies through executive action, raising significant constitutional issues that could reach the U.S. Supreme Court. (ABA Journal, Jan. 29).

Federal Workforce

• The Office of Personnel Management (OPM) announced a buyout program offering federal employees severance equal to eight months' salary if they resign by February 6. (The Hill, Jan. 30)

• Employees who stay do not have a guarantee of their job – but must return to full-time, in-office work as per an executive order signed by Trump on inauguration day. (Washington Post, Jan. 23)

• DOGE, led by Elon Musk, estimates the push for “deferred resignations” could shrink the federal workforce by 5% to 10%. (AP News, Jan. 28) (Axios, Jan. 28)

• Meanwhile, Trump has ousted Democratic appointees of the National Labor Relations Board (NLRB) and the Equal Employment Opportunity Commission (EEOC) before the expiration of their terms. Litigation challenging these firings is highly likely. (Federal News Network, Jan. 28).    

Federal Office Leases

• DOGE is also reportedly focused on reducing federal government leases in private-sector buildings. Musk has installed “longtime associates” at the General Services Administration (GSA) to reduce the footprint of U.S. owned and leased real estate. (NextGov, Jan. 30)

• Musk’s visit yesterday to GSA headquarters could “presage more cost-cutting efforts” to “right-size the Federal real estate portfolio of more than 7,500 leases.” (New York Times, Jan. 30)

• A recent Trepp analysis quantifies the impact of GSA-leased space in the Chicago, Dallas, Los Angeles, New York City, Washington, DC, and other metro areas where federal tenancy accounts for significant percentages of total office inventory.

• Just as federal workers are returning to offices—prompted by a Trump Executive Order signed after his inauguration—the “cumulative damage” of canceling federal leases under a DOGE-led initiative “would be severe.” (GlobeSt, Jan. 20).

Looking Ahead

• Ongoing budget reconciliation discussions on Capitol Hill suggest that further government funding cuts remain a possibility as part of broader fiscal policy negotiations. The situation remains fluid, with potential implications for various federal programs.

• On Wednesday, House Republicans outlined their budget blueprint, setting fiscal targets and potential cuts as they prepare to draft a reconciliation package next week. (Politico, Jan. 29)

• However, Republicans remain divided on strategy for advancing President Trump’s agenda. House Republicans favor a single-bill approach, while Senate Majority Leader John Thune indicates that his conference has developed an initial budget as part of a two-step plan to pass border security measures, tax cuts, and other priorities. (Politico, Jan. 29)

The Roundtable will continue to stay informed about further developments as the administration's policies evolve.

The Federal Open Market Committee (FOMC) held the federal funds target range steady at 4.25% to 4.50% on Wednesday, as widely anticipated, during its first meeting of 2025. This decision marks a departure from three consecutive rate cuts, which collectively lowered the target range by 100 basis points since September.

Fed’s Decision

• Chair Fed Jerome Powell indicated that inflationary trends are headed in the right direction. The Fed maintained its assessment that the risks to its dual mandate—promoting a strong labor market and controlling inflation—remain “roughly in balance.” (ConnectCRE, Jan. 29)

• The country's inflation rate remains somewhat elevated above the Fed’s target of 2%. In projections released at last month’s meeting, most officials signaled they expected the Fed to lower rates in the year ahead, but were less certain over how many times the central bank would cut.

•  Most of them penciled in two rate cuts this year, down from four cuts in projections released last September, assuming progress in lowering inflation continued. (CoStar, Jan.29) (WSJ, Jan.29)

Looking Ahead

• Powell highlighted that future decisions will be guided by “real progress” in bringing inflation down toward the Fed’s target or “some weakness” in the labor market. (ConnectCRE, Jan.29) 

• President Donald Trump’s plans to cut taxes, impose hefty tariffs on key imports and deport millions of immigrants who lack permanent legal status have generated unusual uncertainty about the course of the economy, inflation and interest rates. (USAToday, Jan. 27)

• Thomas LaSalvia, Moody’s head of commercial real estate economics, told CoStar News in an email that “all eyes are now shifting away from Fed action and towards economic consequences of new administration policies." He added that "moving forward, the extremity of those policy actions will be more influential on economic health.” (CoStar, Jan.29)

Pressure From The White House

• Trump says he will “demand” lower interest rates in a virtual address last week to the World Economic Forum in Davos, Switzerland.

• When asked about the comments, Powell, sought to stay above the fray. “I’m not going to have any response or comment whatsoever on what the president said. It’s not appropriate for me to do so,” he said. “The public should be confident that we will continue to do our work as we always have, focusing on using our tools to achieve our goals.” (USNews, Jan.27)

• In the wake of the Fed’s interest rate announcement, President Trump took to Truth Social: “Because Jay Powell and the Fed failed to stop the problem they created with Inflation, I will do it by unleashing American Energy production, slashing Regulation, rebalancing International Trade, and reigniting American Manufacturing, but I will do much more than stopping Inflation, I will make our Country financially, and otherwise, powerful again!” (TheHill, Jan.29)

What to Watch: Tariffs

• White House Press Secretary Karoline Leavitt told reporters today President Trump plans to move forward with a 25% tariff on imports from Canada and Mexico starting tomorrow, and an additional 10% tariff on Chinese imports. (USA Today, Jan. 31)

• Howard Lutnick, Trump's Commerce Secretary Nominee, told the Senate during his confirmation hearing this week, that he advised Trump to impose country-by-country tariffs to restore trade "reciprocity" and vowed to tighten restrictions on China’s access to advanced AI technology. (Reuters, Jan. 29)

• These tariffs could have significant repercussions for the U.S. economy, including housing affordability. Any tariffs on imported materials like steel, aluminum and lumber are likely to drive up costs for developers and impact efforts to address the housing shortage. (Roundtable Weekly, Jan. 24 | Nov. 27)

The Roundtable will continue to track coverage on interest rates and tariffs, and the implications for commercial real estate.