Reduced federal spending may boost commercial real estatevacancies as tenants lose sales from one of their biggestcustomers: the U.S. government.

Funding cutbacks would be felt most in such cities as Rockvilleand Bethesda, Maryland, where defense contractor Lockheed MartinCorp. has plants, and Norfolk, Virginia, home to the largest U.S.naval base, said Chris Macke, senior real estate strategist atCoStar Group Inc. Boston, San Diego and San Jose, California, wheretechnology companies are big employers, also may be affected,depending on the trims made, he said.

“Federal spending cuts would have a widespread and materialimpact on private-sector employment and therefore commercial realestate space demand,” Macke wrote in a July 25 report. “Theproposed budget cuts may hurt private-sector employment more thanmost realize.”