Leasing to government: Landlords balance high credit, red tape
Few private-sector firms can rival federal agencies for credit quality. The same could be said for most state agencies and municipal governments in communities where the public sector makes up part of the tenant base. Particularly in periods of economic uncertainty, landlords can appreciate the relative assurance that a government tenant will fulfill its contractual obligations through the end of a lease term. Government default risk, at least at the federal level, is minimal, even in the event of a radical economic shift, such as a recession.
That exemplary credit can come at a price, however, chiefly in the form of bureaucratic processes and other forms of red tape. Real estate owners and investors should weigh these key points when deciding whether to market their properties for lease to government entities.
Public administrations and agencies bear a responsibility to spend tax dollars wisely and are unlikely to pay rent