GSAXCHANGE, the investment sales arm of Colliers Government Solutions, has published its Spring 2014 “Government-Leased Assets” report, which includes an overview of sales activity and trends in the federal sector.
Driven by the lack of product with long lease terms, investors have been forced to adjust their acquisition criteria by shortening minimum lease term requirements. Coupled with an increasing interest rate environment, 2013 produced two noticeable trends. First, per square foot prices for GSA-leased asset sales fell more in line with per square foot prices for office building sales overall, which is currently in the midst of a recovering investment environment. Second, the average cap rate for GSA-leased asset sales moved higher to match the increase in deals with shorter lease terms. Although interest rates continue to hold firm or even decline as Treasury yields stabilize and spreads tighten, this trend will likely continue into 2014, as the supply of available GSA-leased assets for sale with longer (ten or more years) firm lease terms remains tight and investors adjust their risk tolerances and pursue assets with shorter firm lease terms at higher cap rates.
To read the full report, click here.