When Is It Right To Lease From A REIT?

October 03, 2010

Leasing from a REIT could be a smart strategy for a corporate tenant for these two reasons:

First, a REIT often offers more flexibility to a corporate tenant than most private or institutional landlords.  In most cases, today’s tenants need short-term leases with room to scale up or down.  REITs typically have a critical mass of square feet over several buildings in a focused area from which to draw space options for tenants unlike private or institutional landlords that might have more limited options such as a single building.  Also, from an ownership standpoint, private and institutional landlords often have buildings in unrelated limited partnerships or specific building funds.

Second, a REIT based lease will typically offer more transparency because most REITs that a corporate tenant would lease space from are publicly traded.  This financial structure gives the tenant the opportunity to assess landlord credit risk during the due diligence phase.

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