Tenant Riskiness, Contract Length, and the Term Structure of Commercial Leases

Jan K. Brueckner and Stuart S. Rosenthal

No 10189, CESifo Working Paper Series from CESifo

Abstract: This paper explores the connection between tenant riskiness, commercial lease length and the term structure of lease contracts. Theory shows that the possibility of default on a long-term lease generates a risk/lease-length connection. The empirical work uses a large CompStak lease dataset combined with tenant characteristics (including risk) from Dun & Bradstreet. Regressions show that lease length is inversely related to the D&B risk measures, as predicted, and that risky tenants pay a higher rent premium for long-term contracts than low-risk tenants. The presence of such tenants thus raises the slope of the term structure of commercial rents.

Keywords: lease length; tenant riskiness; rent term structure (search for similar items in EconPapers)
JEL-codes: M20 R30 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_10189

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