Expansion Option Valuation Calculator

Expansion options reduce relocation risk. This calculator values.

Expansion SF

Market rent/SF at exercise

Option rent/SF

Exercise probability %

Option term years

Option value

$40,000

Annual savings if exercised

$20,000

Total savings if exercised

$100,000

How the math works

Annual savings = SF × (market rent − option rent). Total if exercised × probability = option value.

5,000 SF with $4/SF savings = $20k/yr. Over 5 years = $100k. Probability 40% = $40k option value. Meaningful concession worth negotiating; price tenant pays via tighter primary-lease terms.

How to Use

Enter expansion SF.
Enter market rent/SF at exercise.
Enter option rent/SF.
Enter exercise probability %.
Enter option years.
Read option value.

Frequently Asked Questions

Rights structure?

Must-take (forced expansion): tenant obligated if space vacates. Option (choice): tenant exercises only if desired. Must-take imposes risk; pure option favors tenant. Price: must-take gets big rent break; pure option gets modest concession.

Option terms?

Rent at expansion: fixed bump, market, or pre-negotiated step. Notice period: 12-18 months typical. TI allowance: separate negotiation at time. Free rent: pro-rated or none. Many expansions silent on improvements — tenant should nail down.

Tenant should get?

ROFR on adjacent space (cheap; limited scope). Expansion option with rent formula favorable (e.g., max of 95% FMR or fixed escalator). Relocation avoidance — pick lease with expansion flexibility even at moderate premium.