An Investigation into the Credit Tenant Characteristics of Department of Defense Contractors

Daniel Rivetti and Elaine Worzala ()

Journal of Real Estate Portfolio Management, 2003, vol. 9, issue 3, 179-185

Abstract: In the next few years, it is anticipated that the Department of Defense (DoD) and other government agencies will begin to outsource their civilian workforce to private contractors. The real estate and facility management sectors are prime areas for this privatization strategy. Current regulations favor DoD contractors that are tenants rather than owners. This will create a high credit lease opportunity for real estate investors. This study explores the impact of the privatization trend toward creating high quality office and industrial investments for the real estate marketplace. Given the government contract bias toward renting, a new group of credit tenants may appear. A hypothetical DoD tenant is used to explore the implications of the new regulations on the real estate market. This study posits that large office and industrial park complexes will be positively affected and properties in the right location to attract the new credit tenants that have been awarded privatization contracts will become more valuable, especially to the institutional investor.

Date: 2003
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DOI: 10.1080/10835547.2003.12089685

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