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Expansion Option Economics Calculator
Expansion options protect tenants from being squeezed in growth.
Option value
$230,000
Total premium cost
$50,000
Expansion savings value
$280,000
How the math works
Savings = SF × $/SF × remaining years. Premium total = annual × total years. Option value = savings − premium.
10k × $4 = $40k/yr × 7 = $280k savings. − ($5k × 10 yrs = $50k premium) = $230k net option value.
How to Use
- Enter expansion option SF.
- Enter expected rent savings/SF.
- Enter years to expansion.
- Enter option premium cost.
- Read option value.
Frequently Asked Questions
Why negotiate expansion option?
Fast-growing tenants may need additional space within 2-5 years. Expansion option locks in current landlord and building, avoids relocation cost. Typical: 25-100% expansion right at fair market or current rate.
Option pricing?
Landlord charges premium for option (0.5-2% of base rent, annually). Tenant typically pays to hold adjacent space off market. Must-take options (auto-exercise) cheaper than tenant-option (must-take). Cost reflects landlord opportunity cost.
Structures?
Right of First Offer (ROFO): tenant gets first shot at available space. Right of First Refusal (ROFR): tenant matches third-party offer. Must-take: tenant commits regardless. Expansion option: tenant decides within a window, pays premium.
How often should I rerun this?
Rerun this calculator whenever inputs change materially — new rent roll data, rate moves, loan balance updates, or quarterly operating data. For active deals, monthly refresh is typical. For stabilized assets under monitoring, quarterly is fine. Treat the output as a decision tool, not a one-time answer — market conditions evolve and so should your analysis.
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