Rise in Federal Lease Cancellations Hits Los Angeles

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Vacant office spaces in downtown Los Angeles highlight the impact of federal lease cancellations.

News Summary

Los Angeles faces a significant surge in federal lease cancellations, influenced by spending cuts under the Trump Administration. Over 70,000 square feet in L.A. County were terminated, marking California as a leader in such disruptions. Key federal entities, such as the FDA and FHWA, are involved, and the trend has raised the office vacancy rate in downtown L.A. to 34%. With 1.1 million square feet at risk for future cancellations, these terminations may reshape urban dynamics, albeit with challenges in transforming the spaces into affordable housing.

Los Angeles is witnessing a substantial rise in lease cancellations by federal agencies as spending cuts under the Trump Administration take a toll on various operations. Recent reports indicate that more than 70,000 square feet of federal leases were canceled in L.A. County in 2025, contributing to California leading the nation in such terminations. This trend is significant, with Los Angeles accounting for 21% of the total lease cancellations in the state.

Several key locations impacted by these cancellations include Wilmington, Rowland Heights, Monterey Park, Brentwood, downtown Los Angeles, and Mid-City. Major federal entities involved in these lease terminations comprise the Federal Highway Administration, the U.S. Food and Drug Administration, and the Natural Resources Conservation Service. Furthermore, lease cancellations in nearby Ventura County have compounded the situation, surpassing 100,000 square feet across the area. In comparison, regions like the Inland Empire and Orange County recorded cancellations of over 21,000 and 26,000 square feet respectively.

The Department of Government Efficiency (DOGE) has pointed to these cancellations as a means to achieve substantial savings, estimating that the lease terminations could result in $155 million in financial benefits as of the end of June. The trend in lease cancellations has intensified in recent months, leading to close to 6 million square feet of federal leases being canceled nationwide in the last half-year alone, as reported on July 1.

The shift towards reducing office space needs among federal agencies has been exacerbated by changes in work habits and requirements following the Covid-19 pandemic. In Los Angeles, approximately 90% of the canceled leases are on “soft term” agreements, allowing for termination after a certain period, indicating an ongoing adaptation to new operational standards.

Currently, about 1.1 million square feet of federal office leases in Los Angeles are at risk for future cancellations. Most of these leases are categorized as Class B and Class C office spaces. This increase in lease terminations has contributed to a significant rise in the overall office vacancy rate in downtown Los Angeles, climbing to 34% in 2025 from 14% in the fourth quarter of 2019. The growing number of vacant office spaces presents potential implications for the real estate market, affecting property owners, investors, and other stakeholders involved in commercial real estate.

Timing for lease terminations typically spans from six months to one year, leading to expectations of further market vacancy. Industry experts have termed these cancellations as “low hanging fruit,” highlighting that these spaces are less frequently utilized. While the immediate effects of these cancellations may be challenging, they hold potential for future revitalization efforts in local neighborhoods. There may be opportunities for the conversion of canceled office space into housing units; however, such projects encounter obstacles due to high real estate costs and an often lengthy approval process in Los Angeles.

Despite the opportunities, skepticism remains regarding the feasibility of transforming federal lease cancellations into affordable housing. Regulatory hurdles present significant challenges, complicating the notion of repurposing this space. Nevertheless, many in the industry believe that the ongoing trend of lease cancellations could trigger long-term positive changes, ultimately reshaping urban spaces and supporting revitalization initiatives.