Renewal Probability Value Calculator

Renewal probability modeling is core to holding/exit decisions.

Current annual rent

Renewal probability %

Renewal rent uplift %

Re-tenanting downtime (mo)

Re-tenanting new rent / yr

Expected annual value

$348,688

Renewal scenario value

$472,500

Re-tenant scenario value

$118,750

How the math works

Renewal = rent × (1+uplift). Re-tenant = new rent × ((12−downtime)/12). EV = weighted average.

$472.5k × 65% + $356k × 35% = $307.1k + $124.6k = $431.7k expected annual value.

How to Use

Enter current annual rent.
Enter renewal probability %.
Enter renewal rent uplift %.
Enter re-tenanting downtime months.
Enter re-tenanting new rent.
Read expected value.

Frequently Asked Questions

Why probability-weight renewals?

Single-asset and single-tenant commercial valuations depend heavily on renewal outcome. A 5-year lease with 70% renewal probability is worth significantly more than one at 40%. But analysts often treat renewal as binary (assume renew). Probability-weighting produces a calibrated expected value — renewal scenario × probability + re-tenanting scenario × (1 − probability). Better underwriting, better lender comfort, better LP disclosure.

What drives renewal probability?

Tenant financial health (credit rating, parent guarantee, sales per SF), build-out investment (high fit-out = stickier), location dependence (flagship location, customer proximity), lease terms (options embedded, concessions available), operator relationship (easy to deal with = higher renewal). Institutional landlords maintain probability scores per tenant updated quarterly — Class A retail typical 65-80%, office 50-70%, industrial 75-90%.

Re-tenanting economics?

Downtime (6-18 months typical for commercial, 1-3 for multifamily), TI/work letter ($20-150/sqft), leasing commission (3-6% of new lease), brokerage fees, marketing, legal. Combined re-tenanting cost often 15-25% of the new multi-year lease value. This is why renewals — even at flat rent — often beat re-tenanting on a risk-adjusted basis. Run the math; don't assume.

How does this affect cap rate?

Commercial properties with high renewal probability (strong credit tenants, long WALT) trade at 25-75 bps tighter cap rates. Low-probability properties trade 50-150 bps wider. That's 3-10% valuation differential on identical cash flows. Exit timing should consider renewal probability — sell into a cycle when lease has 3+ years remaining and probability is high, refinance (don't sell) when probability is low and downtime risk is unquantified.