WASHINGTON, DC–The General Services Administration appears to be pursuing longer leases, Colliers International's Kurt Stout writes in new blog post.
It is a remarkable claim. As we all know, federal government leases have been anything but long term in recent years due to several factors — budget issues, questions about an agency's or office's future viability and mandates to consolidate or downsize space. And most recently, the Trump Administration has signaled its intent to downsize even further — in some cases dramatically — many departments.
Yet Stout writes:
To prove [our assertion that leases are getting longer], we analyzed 1,653 pre-solicitation notices posted to the Federal Business Opportunities website (www.fbo.gov) from the beginning of 2011 to the present. These pre-solicitation notices, as the name suggests, provide public notification of planned lease procurements, including the proposed total and non-cancelable (“firm”) lease term. Analyzing these lease procurements by date of their FBO postings, we can see that pre-solicitation notices posted last year and through the start of this year are, on average, requesting longer leases than in previous years. Just as important, they are also requesting longer firm terms. This is good news for lessors because longer lease terms should improve building valuations and ease financing.
There is already some evidence that this leasing strategy is already taking hold, Stout continues. GSA analysis that was provided to Stout shows a slight uptick among long-term leases. The charts below show the number of new lease commencements — not to be confused with lease executions — by fiscal year, he writes.
Though long-term leases are still a relatively small portion of overall new leasing activity, there has been some recent improvement to the number of leases that are at least 15 years in total length and those that have at least 10 years of non-cancelable term.
This doesn't mean that average term in the leased inventory is growing, Stout notes. Short-term extensions are still the norm, he concludes.
WASHINGTON, DC–The General Services Administration appears to be pursuing longer leases, Colliers International's Kurt Stout writes in new blog post.
It is a remarkable claim. As we all know, federal government leases have been anything but long term in recent years due to several factors — budget issues, questions about an agency's or office's future viability and mandates to consolidate or downsize space. And most recently, the Trump Administration has signaled its intent to downsize even further — in some cases dramatically — many departments.
Yet Stout writes:
To prove [our assertion that leases are getting longer], we analyzed 1,653 pre-solicitation notices posted to the Federal Business Opportunities website (www.fbo.gov) from the beginning of 2011 to the present. These pre-solicitation notices, as the name suggests, provide public notification of planned lease procurements, including the proposed total and non-cancelable (“firm”) lease term. Analyzing these lease procurements by date of their FBO postings, we can see that pre-solicitation notices posted last year and through the start of this year are, on average, requesting longer leases than in previous years. Just as important, they are also requesting longer firm terms. This is good news for lessors because longer lease terms should improve building valuations and ease financing.
There is already some evidence that this leasing strategy is already taking hold, Stout continues. GSA analysis that was provided to Stout shows a slight uptick among long-term leases. The charts below show the number of new lease commencements — not to be confused with lease executions — by fiscal year, he writes.
Though long-term leases are still a relatively small portion of overall new leasing activity, there has been some recent improvement to the number of leases that are at least 15 years in total length and those that have at least 10 years of non-cancelable term.
This doesn't mean that average term in the leased inventory is growing, Stout notes. Short-term extensions are still the norm, he concludes.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
