WSJ What’s News - Trouble for the D.C. Office Market—No Matter Who Wins the Election

Episode Date: July 23, 2024

P.M. Edition for July 23. The office market in Washington D.C. is in trouble, facing rising foreclosures, plunging values and record vacancies. Reporter Peter Grant explains how the outcome of the 2024 presidential election could affect its fortunes. And Secret Service Director Kimberly Cheatle resigns after backlash over the attempted assassination of Donald Trump. Justice Department reporter Sadie Gurman has more. Plus, Vice President Kamala Harris makes her presidential campaign trail debut. Francesca Fontana hosts. Sign up for the WSJ's free What's News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

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That's BetterHelp.com. The director of the Secret Service has resigned over the near assassination of Donald Trump. And D.C.'s office market is in trouble with record vacancy rates and plunging values. And the outlook is grim. I would say that whether Trump wins or the Democratic candidate wins, the outlook isn't great for the Washington market. Plus, what's driving U.S. home prices higher and Americans out of the housing market? It's Tuesday, July 23rd. I'm Francesca Fontana 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. Secret Service Director Kimberly Cheadle resigned today amid bipartisan outrage over her agency's failure to stop the near-assassination of Donald Trump during a campaign rally. Homeland Security Secretary Alejandra Mayorkas said Ronald Rowe, the agency's deputy director and a 24-year veteran of the service, will serve as its acting head. The departure of Cheadle, who was appointed by President Biden in 2022, follows yesterday's intense congressional hearing during which, as you might recall, she offered minimal new information about the July 13th assassination attempt in western Pennsylvania. Justice Department reporter Sadie Gurman joins me to discuss Cheadle's resignation. Sadie, this doesn't really come as a surprise, right? No, not at all. In fact, this is one of the rare moments of bipartisan agreement that I've ever seen in Congress.

We had the Democratic leader and Republican leaders of the House Oversight Committee calling for her to step down. And at that point, it became clear that she really didn't have a choice. And we were just sort of waiting for the moment to come. Where does this leave the Secret Service? The Secret Service is just totally embattled. They are in the white hot spotlight right now, just as we get election campaign season going and law enforcement officials are reporting an increasing number of threats to government officials, including many of the people that they are charged with protecting as part of their mission. They have a zero fail mission and obviously they failed.

So, you know, it's just, it's not a great look for the Secret Service and they're going to have to do a lot to rebuild public confidence in their agency. And what happens now with the investigation about the shooting? Well, there are multiple investigations now underway into how this 20-year-old also join in these investigations, trying to get to the bottom of what happened here. In addition to that, we have the FBI, which is investigating the shooting itself and the motivation for it, which remains a mystery. And then we have an internal watchdog from the Department of Homeland Security that is also examining it. The Secret Service itself is doing its own internal look. And so hopefully,

at some point, all of these inquiries will lead to some answers publicly. That was reporter Sadie Gurman. Vice President Kamala Harris made her presidential campaign trail debut today, presenting Donald Trump as a man incapable of leading a country in the 21st century. Harris gave a 20-minute speech to a fired-up Milwaukee-area audience, which her campaign said totaled more than 3,000 people, and was the largest she or Biden had held for the 2024 election. And Wisconsin, this campaign is also about two different visions for our nation.

One where we are focused on the future. The other focused on the past. The vice president, who is on track to officially land the Democratic nomination next month, pledged to unite the Democratic Party so it's ready to win in November. And Senator Bob Menendez signaled that he would leave Congress after he was found guilty on criminal corruption charges. The move would mark an abrupt end to the New Jersey Democrats' more than 50 years in public service. According to people familiar with the matter, aides to Menendez were told he would resign effectively on August 20th. Menendez is scheduled to be sentenced on October 29th and could face decades in prison. Coming up, why the D.C. office market is in trouble, no matter who wins the White House.

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facing rising foreclosures, plunging values, and its highest vacancy rate ever. And it's poised to get even worse, regardless of which candidate wins the presidential election this fall. Our reporter Peter Grant joins me now. Peter, what's going on with the D.C. office market? Ever since the beginning of the pandemic, we've been watching closely the health of all downtown office markets, and all have been suffering because of the poor return to office. The D.C. market in particular has been interesting because of the presence of the federal government, which is by far the largest employer in D.C. And the federal government has been a lot slower than private industry in returning workers to offices. Despite the best efforts of the Biden administration, the pace has been slow, and that's been affecting downtown D.C. Office market in D.C. just hit the highest vacancy rate on record, over 20 percent. So it's suffering. Values are going

down. The shops, the stores, the restaurants, the bars are all suffering because the downtown return to office just hasn't hit the levels that a lot of city officials would like to see. I was curious, are there any urban markets that are bucking the trend? It really is a nationwide trend. But you are right, some markets are doing better than others. Markets in the Sun Belt consistently have performed better than cities like Chicago, San Francisco, New York. But some of the cities that were hit hard initially are showing signs of a comeback like New York. But Washington is still trailing. Like you said, Washington seems to face a unique set of difficulties or challenges.

How's the political landscape expected to affect the market in D.C.? The political landscape has been long affecting the office market in D.C. I mean, one of the reasons the Biden administration has been frustrated in its efforts to get workers back to offices is that it's facing a lot of pushback from civil service unions. And civil service unions have been big Democratic supporters. civil service unions. And civil service unions have been big Democratic supporters. So the Biden administration has to balance that political consideration with its drive to get workers back to offices. And looking forward, obviously, we're waiting to see how the presidential race plays out. How would a Trump presidency or a Democratic president affect the market? Well, in both cases, the outlook isn't great. If a Democrat comes into the White House,

and of course, it's likely the Democrat will be Kamala Harris, she'll likely continue a lot of the policies of the administration, and she'll probably continue to face the same frustrations that Biden had in trying to get workers back to offices. Trump might be even worse. Now, Trump has long talked about cutting the size of the federal government. He tried to eliminate the education department. But interestingly, Trump also would likely press more to bring workers back to offices and wouldn't be quite as beholden to the civil service unions. But his efforts to reduce the size of the federal government by eliminating departments like the education department or moving agencies out of Washington, which he tried to do in his first term, would also face political opposition.

And it would be sort of unclear how successful he'd be at doing that. That was reporter Peter Grant. Is your employer saying no to letting you work from anywhere? Not just from home, but from another state or another country? What questions do you have about why this pullback is happening and what it says about the future of work? Send a voice memo to WNPOD at WSJ.com or leave a voicemail with your name and location at 212-416-4328. We might use it on the show. Millions of Americans are still priced out of the housing market. According to the National Association of Realtors, home prices hit a new high in June for the second straight month.

The national median existing home price rose to nearly $427,000, a record in data going back to 1999. It's a roughly 4% increase from a year earlier. It's a roughly 4% increase from a year earlier. The combination of high prices and elevated mortgage rates has made homeownership less attractive to renters and kept current homeowners from moving. U.S. housing reporter Nicole Friedman joins me now. Nicole, how are things during this all-important spring homebuying season? So the spring is a super important season for home sales. It's usually when there's the most activity.

A lot of families want to move in the summer so they can get set up before the start of a new school year. And this spring home buying season was pretty lackluster. It was essentially unchanged from last year, which was the worst year for home sales in 28 years. And so it has really been a disappointing 2024 so far for people who are hoping for more of a rebound in activity. But we've just seen continued high home prices and high mortgage rates are just making it really unaffordable for buyers. What have you been hearing from buyers and sellers, people who are trying to navigate this market? So buyers are definitely frustrated. They feel that it's a very expensive market, that rates are high, prices are high. For sellers, it is mixed really depending on where in the

country they're located, that in the Northeast and Midwest, there's still a low inventory of homes for sale. And so homes are still selling quickly in many cases or selling for over asking price. But in the South, especially in Texas and Florida, we've seen a big increase in inventory. And so there are more homes in those markets that are sitting for longer or having to cut prices. That was reporter Nicole Friedman. having to cut prices. That was reporter Nicole Friedman. Now let's have a look at the U.S. markets. The tech-heavy Nasdaq composite inched 0.1 percent lower, while the S&P 500 edged downward by 0.2 percent. And the Dow Jones Industrial Average dropped by 0.1 percent, or 57 points. Plus, two corporate giants posted their latest earnings reports after hours.

Alphabet posted a slowdown in Google's ad sales growth in the latest quarter, while Tesla's second quarter net profit tumbled 45% on slower demand and stiffer competition. And finally, internet scams are evolving. In their quest to fool their marks, bad actors are using AI to replicate voices and appearances. That means the next direct message you get, or even the phone call you answer, could be fake. Even if it sounds like someone you know. Wall Street Journal reporting assistant Cordelia James gave our tech news briefing podcast a few tips on how to stay safe. One of the ways that security experts are saying that

you can check is by asking a lot of questions. Because sometimes these are bots on the other end. Sometimes these are like real people. But once you ask a bunch of questions, you might be able to find some holes in terms of what they're saying. So sometimes these bad actors might want to impersonate like a family member or a friend or someone that you know. Go ahead and like pre-arrange a code word with that person, that loved one. You want to make sure you're using a goods and services transaction rather than a peer to peer transaction. So if the person is asking you to send it through Apple Cash, that's a red flag. Use something such as PayPal or Venmo. So that way, if it turns out that the other person on the other end isn't legitimate,

then you could at least get that money back. You can hear more about it on our Tech News Briefing podcast. But remember that although tech companies are taking steps to stop suspicious communication before it can reach you, you still need to stay alert. Before we go, we have a correction. Higher U.S. home prices are driving many Americans out of the housing market. An earlier version of this podcast incorrectly said that higher sales were responsible. And that's What's News for this Tuesday afternoon. Today's show was produced by

Anthony Banzi and Pierre Bien-Aimé with supervising producer Michael Cosmitas. I'm Francesca Fontana for The Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.