Uncle Sam, Real Estate Man

I need YOUR building

By Ken Ashley

ATLANTA (June 3, 2010)

At a recent conference in Washington, D.C. I learned more of the United States Government’s intent to lease millions of additional square feet in the near future. As this article from the Washington Post suggests, the “government is taking advantage of the abundance of space in newly constructed buildings for bargain prices.” Hmmm, could the Federal Government be learning from corporate America?

One relatively little known fact is the General Services Administration, which serves as the government’s broker, is a real thought leader in Workplace Innovation. We consistently see them well represented at all the top commercial real estate conferences. At least they are trying to innovate as they spend our money….

But now back to the growth issue. Another interesting point from the Post article: ” The government spent 2009 planning for growth….(which) will materialize in 2010.” It isn’t hard to figure out that with stimulus money and expansion of Federal agencies under the current administration that the government will grow in 2010 and beyond.

The question is where and how this will impact other tenants in the marketplace. New York, Northern Virginia and D.C. proper are slam dunks. Likely candidates for growth also include LA, Chicago, Dallas, Atlanta and other major hub cities for an uptick. New Orleans, and the coast line of Mississippi and Louisiana are both currently experiencing surging demand related to the oil spill.

Most government agencies – outside of D.C. and Northern Virginia – are not going to be in the same building as the typical corporate tenant, though there certainly are exceptions. It is important to keep the goverment in mind because they have obviously have great credit and in certain areas can actually create enough demand to cause rates to moderate.

Put another way, if you are in a company town, watch out for the company.

2 responses to “Uncle Sam, Real Estate Man

  1. Palmer Bayless

    Ken, what is the typical term of U.S. federal government leases? In retail leases with state entities (i.e., DMV locations) we usually see year to year leases with multiple renewal options.

  2. Palmer, US will sign leases similar to corporate America which can range anywhere from very short terms, but more likely are 7-10 years. They love TI too…..

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