The future of the federal government’s footprint in Chicago is uncertain as the Trump administration embarks on a plan to shed up to half of all government office space across the nation, while also shrinking the federal workforce.
The federal government owns 19 properties in Chicago, including the John C. Kluczynski Federal Building and the 28-story Ralph H. Metcalfe Federal Building. It also leases more than 2 million square feet of space throughout the entire metro area, including a 439,000-square-foot complex at 2111 W. Roosevelt Road, which has served as the regional headquarters of the Federal Bureau of Investigation since 2006.
Although it accounts for only a small slice of Chicago real estate, a pullback by the federal government could deal a blow to the shaky downtown office market. It’s also unclear how a downsizing of federal space might unfold, and whether the government could entice buyers if it attempts to sell any Chicago buildings.
“Investors like certainty, and there is way too much uncertainty right now, especially with the federal government’s plans for downsizing and what that would mean,” said Alissa Adler, a senior vice president of Colliers, a commercial real estate firm.
Prospective buyers of federal buildings may worry about getting stuck with vacant offices, depending on how far Elon Musk and the Department of Government Efficiency go in reducing the federal workforce.
“The last thing Chicago needs right now are more vacant office buildings,” Adler said.
The U.S. General Services Administration operates most federal offices and has not released any detailed plans. GSA officials also did not confirm a report this week from Wired magazine that “non-core” assets, including the Kluczynski building, home to the offices of U.S. Sen. Dick Durbin, U.S. Sen. Tammy Duckworth, the Internal Revenue Service and the Drug Enforcement Administration, could be sold. “Core assets,” such as the Everett M. Dirksen U.S. Courthouse at 219 S. Dearborn St., would remain in federal hands.
“GSA is reviewing all options to optimize our footprint and building utilization,” a GSA spokesperson said in a written statement to the Tribune. “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.”
Building tenants say they don’t know what specific steps the GSA might take.
“We haven’t heard anything about the disposal of any GSA buildings that house offices of Senator Durbin, but are aware that DOGE is looking to dramatically reduce the workforce and property holdings of GSA, and restricting the sharing of information,” said Emily Hampsten, Durbin’s deputy chief of staff, in a written statement.
A recent message to employees of GSA’s Public Buildings Service from its newly hired commissioner Michael Peters stated the government occupied too much space, and much of its portfolio had substantial levels of deferred maintenance, increasing the costs for taxpayers.
“It is clear that the footprint (leased and owned) of non-(Department of Defense) federal building space should be reduced by at least 50%,” Peters stated in the message, which was viewed by the Tribune. “This reduction will come from more efficient space utilization, as well as an overall downsizing of the federal workforce.”
“GSA is going to be a substantially smaller organization in the future,” he added.
The strategy is an acceleration of trends in place for more than a decade. The GSA began shrinking its footprint after 2012, when the federal government was leasing 198.6 million square feet of space across the U.S., according to a Colliers analysis. The agency had shed almost 21 million square feet of leased space by the end of 2023.
Robin Carnahan, director of GSA during the Biden administration, said in late 2023 that because federal agencies were continuing hybrid and remote work strategies, the government could shrink its footprint by another 30%, consolidating many offices and selling off underutilized buildings.
In 2023, the GSA said it wanted to sell the William O. Lipinski Federal Building at 844 N. Rush St. on Chicago’s Near North Side. The 15-story building houses the U.S. Railroad Retirement Board, which administers benefit programs for the nation’s railroad workers. The GSA has not yet secured a buyer.
The Trump administration added a twist to Carnahan’s plan, proposing deeper cuts in owned and leased space while insisting federal workers should return to the office, mostly scrapping remote work.
Most future space cuts will likely come from federal properties around Washington, D.C., which accounted for nearly 60% of the reductions since 2012, according to Colliers. The government still leases about 46 million square feet in the D.C. metro area.
The federal government owns more than 5.3 million square feet in Chicago, according to GSA data, not including a pair of historic towers on State Street, which it decided last year will be turned over to a development team and preserved for other uses.
Significant federally owned Chicago properties include the Harold Washington Social Security Center at 600 W. Madison St. and 101 W. Ida B. Wells Drive, a 569,000-square foot building which houses Department of Homeland Security offices. The federal government also owns the 12-story U.S. Customhouse at 610 S. Canal St. Leased space in the metro area includes 188,000 square feet at 2300 E. Devon Ave. in Des Plaines, and more than 100,000 square feet at both 175 W. Jackson Blvd. and 525 W. Van Buren in downtown Chicago.
The federally owned properties in Chicago are well-occupied, with a total vacancy rate of less than 8%, according to GSA data. Downtown Chicago’s office vacancy rate was more than 23% at the end of 2024, Colliers found.
The government could significantly shrink its Chicago footprint without selling any property. Federal leases typically have termination options that officials can exercise before the agreed term expires. According to GSA data, at more than a dozen of its leased downtown offices, totaling nearly 400,000 square feet and including ones at 175 W. Jackson, 231 S. LaSalle St. and 181 W. Madison St., the termination option has already kicked in or will do so later this year, giving GSA the opportunity for quick exits.
Adler said investors could find the Lipinski building an interesting prospect, considering its location in the amenity-rich Near North Side neighborhood and the possibility of converting it into residences. But the government’s main Central Loop office properties could be tougher to sell.
Although Google agreed to buy and open in 2026 a refurbished James R. Thompson Center, sparking hopes for a downtown revival, older central Loop properties were hit hard by the pandemic and the rise of remote work, Adler said. And institutional investors, ones with the wherewithal to buy and renovate large buildings such as Kluczynski or the Metcalfe, are staying away from the central Loop for now.
Federal buildings could still be attractive to some potential buyers if the government was willing to sign long-term leases and keep them filled.
“I’m hoping, and have to believe, that if they do this, they will do sale-leasebacks,” Adler said, referring to an arrangement that would allow the federal government to sell the buildings but continue leasing and occupying the space inside.
Federal buildings with a lot of vacancy would be expensive to renovate and fill with new tenants, she added. Many companies, especially those trying to entice workers back to office, now want high-end amenities such as employee lounges, advanced conference facilities, rooftop decks and updated fitness centers, and federal buildings typically feature nothing more than basic services.
“”These are not buildings that are going to have a lot of frills,” Adler said.
