A COMPARISON OF FEDERAL-GOVERNMENT OFFICE RENTS WITH MARKET RENTS

This study examines Federal Government office leases using data from T exas and Oklahoma during the 1981-1991 time period. The lease indiffer ence model presented here indicates that landlords may be willing to a ccept lower rents from government tenants due to reduced tenant risk, but that such discounts may be offset by other premiums implicit in th e lease contract. The data collected for this study reveal that rents paid by the government are significantly higher than average market re nts during this time period. A time-series, cross-sectional regression analysis of the spread between market rents and office rents to gover nment tenants in nine metropolitan markets suggests that the differenc e is affected in part by expense pass-throughs, lease period, amount o f space leased, and local market conditions.