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News release

TYSONS, VA

Budget Approval Not Expected to Increase Govt. Contractor Lease Duration

Contractors Eye New Workplace Strategies to Maintain Lowest Cost Solution for Government


​TYSONS, Va., March 6, 2014 -- The average lease for the 61 government contractors in the Northern Virginia market has been shortened by 22.5 percent over the past two years when compared to 2003 through 2006, according to the Winter 2014 Government Contractor Report from JLL.

Lease terms are tied to federal procurement spending, which has also fallen in Northern Virginia, dropping to $21.4 billion in 2013 from $43.0 billion in 2010.

Information technology and other shorter-cycle business entities have generally seen the biggest decline in sales, since federal contracts related to those industries can be trimmed faster. Longer-cycle businesses, such as ships or aircraft, are still performing well due to multi-year commitments.

The bright spot for landlords came in the form of an approved congressional budget, which should finally lead to clear and aggressive real estate decision-making, according to Dan Evans, Managing Director of Tenant Representation, in JLL’s Tysons office.

Evans says that contractors will reduce their real estate costs and increase employee densities by implementing new and/or revised workplace strategies, including hoteling, community workplaces, virtual employee agreements and distance working – all of which will become core pillars of the government contracting workplace environment.

"In order to provide the government customer with the lowest cost solution, contractors will avoid commercial space commitments if possible and negotiate an increase in 'on government site' employees in their contract vehicles," said Evans. "We expect contractors will protect their already compressed profit margins and continue to aggressively lower real estate and facility expenses, which involves closing or merging offices, slashing operating budgets and reducing portfolio footprints."

Evans says that contractors will still only commit to shorter-term leases “unless significant savings can be secured." Accelerated lease renewals and/or relocations will take place if aggressive cost savings can be secured prior to a lease expiration.

Some contractors are expanding into the private sector to help offset government cutbacks, and others will consolidate through merger and acquisition activities, Evans predicts. An example of this is Alliant Techsystems, which saw a 14.4 percent rise in sales in the fourth quarter due to its growth in the sporting industry, according to the government contractor report, a copy of which can be found here: http://www.joneslanglasalle.com/bip/ms/DC/Marketscape/February_2014/GovernmentContractorUpdate-Winter2014.pdf

About JLL
JLL (NYSE:JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual revenue of $4 billion, JLL operates in 75 countries worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 3 billion square feet and completed $99 billion in sales, acquisitions and finance transactions in 2013. Its investment management business, LaSalle Investment Management, has $47.6 billion of real estate assets under management. For further information, visit www.jll.com.