Did you sense a mild “thump” today? A slight disturbance in The Force? Today, December 31st, more GSA leases expire than any other day of the year. It got me thinking why that is, and whether there is any pattern or seasonality to GSA’s leasing process. As it turns out, there are some notable phenomena:
- We suspect that the large volume of leases expiring on 12/31 each year is unique to GSA, which often extends leases on a short term basis while it attempts to complete lease procurements. Lessors, desperate to draw the line somewhere, typically cap such extensions at the end of the calendar year. In fact, relatively few GSA leases actually commenced on 1/1 because New Year’s Day is, of course, a federal holiday. Therefore, we can conclude that GSA’s most common lease expiration date is the product primarily of short-term extensions.
- Most leases expire on the last day of the month (typically the 30th or the 31st and, in the case of February, the 28th or 29th). Though GSA’s policy is to commence leases at any time, as a practical matter the agency’s Contracting Officers tend to establish start dates on the first day of a month and, some number of years later, end dates on the last day of a month. It’s administratively expedient and, if nothing else, it eliminates the hassle of prorating rent.
- What is more unusual is that the second most common expiration date is the 14th (see “Day of Lease Expirations” graph below). Why is that? Here we get to something that is purely governmental: GSA pays rent in arrears and any lease that commences on or before the 15th will be paid at the end of that same month. But any lease that commences after the 15th will be paid at the end of the following month (this policy is outlined in the General Clauses attached to your lease). It’s likely, therefore, that the unusual volume of leases expiring on the 14th is the product of an effort among GSA’s contracting officers (possibly prodded by lessors) to get leases in place before the monthly rent cut-off.
- Contrary to the observation above, an elevated number of leases expire on the 15th too. These would generally have commenced on the 16th–immediately after the cut-off date–and perhaps that is by design.
- Generally speaking, the number of lease expirations increases throughout the year (see “Month of Lease Expirations” graph below). I have no idea why this occurs except to observe that the trend is probably similar in the private sector too. It seems like annual leasing activity is usually backloaded.
- December is the month in which most leases expire–no shocker for the reasons outlined above. Yet, a close second to December is September. September is the end of the federal government’s fiscal year and it is not entirely uncommon for fiscal year budgeting to influence the leasing cycle.
- July 3rd is a very special date. Not a single lease expires on July 3rd, presumably because that would indicate a lease commencement of July 4th. Independence Day is truly sacrosanct. More so, it turns out, than Christmas.
If you see any other trends, post your comments below!