P.M. Edition for Feb. 25. Elon Musk’s Department of Government Efficiency is looking to end or consolidate nearly 100 leases for government agency offices. WSJ reporter Peter Grant discusses the impact on the recovering office market. Plus, thousands of employees on church retirement plans have lost some or all of their pension benefits. WSJ special writer Theo Francis explains how these plans sidestep federal oversight—and employees pay the price. And how a $25 gift card is tearing apart a community in the Hamptons. Alex Ossola hosts. Sign up for the WSJ's free What's News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices
Chapter 1: Why is shopping in person less enjoyable?
Why buying stuff in person is so much less enjoyable than it used to be. Plus, Doja's next target? Government buildings. And D.C. 's entire office real estate market could feel the impact.
By and large, with a shrinking government, a shrinking workforce, things do not look good for Washington in the immediate future.
And the pensions of thousands of employees on church retirement plans may be in trouble. It's Tuesday, February 25th. I'm Alex Osola for The Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today. First up, yet another sign that consumers are not feeling too chipper.
Chapter 2: How is consumer confidence affecting the market?
The conference board released its closely watched index of consumer sentiment for February. Consumer confidence fell for the third straight month, with the biggest month-on-month drop in the last three years. Also, for the first time since June 2024, consumer expectations crossed the threshold that usually signals a recession ahead. Economic worries and tariff fears dragged on U.S.
markets today, with tech stocks among the hardest hit after yesterday's sell-off. The Nasdaq fell about 1.3 percent, and the S&P 500 dropped roughly half a percent, while the Dow ticked up about 0.4 percent. The rise of online shopping has made it easy to buy pretty much anything at any time without ever leaving your couch.
Unfortunately, it's also made the experience of shopping in person much, much worse. My colleague Pierre Bien-Aimé spoke with Suzanne Kappner, who writes about the retail industry for The Wall Street Journal, and asked her why the in-store experience has become worse for many customers.
Chapter 3: What factors contribute to the decline of in-store shopping?
Retailers, they've expanded the breadth of their online offerings tremendously in recent years, you know, to compete with this endless aisle that... Amazon offers. On top of that, they've been opening smaller stores. So there's been a confluence of factors that have contributed to this sense by consumers that, God, shopping's not so much fun anymore.
IBM conducted a survey last year that found that Three-quarters of consumers actually prefer shopping in physical stores, but only 9% are satisfied with the in-store experience. And a big complaint is that the stores lack product variety and availability. The consulting firm Alex Partners recently looked at 30 retailers. and compared their online assortment to what they carry in stores.
And they found on average only 9% of the online offering of women's clothing was available in physical stores. For department stores, the percentage was 7%. At mass merchants, it was only 2%. Specialty retailers were a bit better with about a third of their online goods available in stores.
And does this have any effect on the bottom line when online purchase versus one done in store?
You know, it's funny because a lot of retail CEOs will say, well, I don't really care where a customer shops. They can shop wherever they want, online, in-store, a combination of the two. But in fact, when a customer shops in-store, it's much more profitable than when they shop online because the cost of packing that order and shipping that order and then online returns tend to be higher.
All of that eats into profits of online orders.
That was reporter Suzanne Kappner speaking with Pierre Bien-Aimé. Coming up, why Doja's effort to cut federal leases could be a hit to the office market from California to D.C. That's after the break. In Washington, 21 federal employees who had been working with Elon Musk's Department of Government Efficiency have resigned.
In a letter, the ex-employees who didn't list their names criticized the Doge process and said that they wouldn't offer their expertise to overhaul the government if it meant undermining essential services.
Meanwhile, Doge is targeting nearly 100 leases at government agency offices for termination or consolidation, on top of the Trump administration's effort to sell two-thirds of federally owned office buildings, which we've talked about before on the show. Abandoning so much office space could have a ripple effect on the office market in Washington and beyond.
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Chapter 4: Why are government office leases being targeted?
Well, it is a small amount compared with the overall office market, but the government is one of the largest tenants in the U.S., and it does have operations throughout the country. Obviously, most of the operations are in the Washington, D.C. area where the impact of a contraction would be felt the most, but the government is in many, many, many cities, and even adding 1% or 2%
of office space to these markets could have an impact, especially considering how hard the office market has been hit in recent years.
Yeah, let's talk a little bit about DC specifically. So DC's office market was one of the hardest hit during the pandemic. It's just starting to recover. What could this sort of new glut of office space mean for that market?
D.C. was one of the hardest hit markets, primarily because the return to office by government workers was particularly slow. And there's just a lot of underutilized space. And there was a lot of surplus space even before the pandemic in D.C. So it was never that great. But the vacancy level soared during the pandemic and has really not come back. But by and large, D.C.
is going to get hurt on a number of different levels by all this obsolete space. And it's going to hurt the government because of tax collections. It's going to hurt small businesses because if workers aren't there, they're not going to be going out to bars and restaurants and stores.
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Chapter 5: What impact could government lease changes have on the office market?
What are some other cities or markets that could feel this?
Well, New York has a lot of U.S. government offices. Ohio has a lot of U.S. government offices. Denver does. They're really all over the country. And it does seem the Department of Government Efficiency has its target on a lot of these offices, especially the ones that are underutilized as a way of saving money.
Last month, the Trump administration ordered government workers back to the office full time. That's happening at the same time as the government is cutting back on its office footprint. How do those things fit together?
There is a little bit of push and pull here. On one hand, it would be good for the office market if the government does require workers to come back into the office at a higher rate than they were attending the office during the Biden administration.
On the other hand, the fact is that they are cutting employees and shrinking the government at a much higher rate than they're requiring people to be back in the office. So it's overall negative for office space.
That was WSJ reporter Peter Grant. Thank you, Peter.
My pleasure.
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Chapter 6: How might DC's office market be affected by government lease changes?
House Republicans' budget plan that would pave the way for President Trump's tax, border, and spending cut agenda could soon be put to a vote, but its passage is far from a sure thing. As of this morning, at least four Republican lawmakers said they opposed the plan, and others were still undecided.
With a slim majority, House GOP leaders can afford just one defection if all Democrats are present and vote no. For now, the House leaders are saying that they are pressing ahead with a vote on the budget resolution as early as this evening, though that schedule could slip. What happens to your pension if your employer goes broke?
Typically, a federal insurance program kicks in thanks to ERISA, the Employee Retirement Income Security Act of 1974. But churches and other religious organizations can opt out of the federal system. And that's left hundreds of thousands of workers vulnerable. Pierre Bien-Aimé spoke to Tao Francis, who covers business news for The Wall Street Journal, and asked him about what's going on.
You have a few cases around the country, several where really pension plans or other retirement plans have run into real trouble. And that's usually when the employees of these religious organizations discover that they don't have the same protections that other employees and other retirees have.
So in a few cases, you've had situations where pension plans have not been funded, or the employer goes bankrupt and can't meet those obligations, and the retirees are the ones who really bear the brunt of it.
How many retirees have been affected by this kind of lapse, and how much money are we talking about?
Often people don't find out that the plans are underfunded until... you know, it's too late or until they are at risk of losing their benefits. Nobody knows exactly how many people are covered by these kinds of plans. The IRS was able to identify almost 600,000 people who contributed to church retirement plans, and they contributed about $1.8 billion in that one year alone in 2019.
Another analysis by the Government Accountability Office found that a variety of kinds of retirement plans at a relatively small number of denominations had a total of $89 billion in assets. So it's a lot of people and a lot of money. We also don't know how many times these kinds of plans fail and really leave their retirees and employees in the lurch.
We don't really have an overall picture because one of the things that these plans don't have to do is report on their financial status, either to the Department of Labor or the IRS or, in most cases, to the participants themselves.
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