renewal probability

renewal probability

The average percentage of tenants in a building that are expected to renew at market rental rates at the expiration of their current leases. The figure is used to estimate leasing-related costs and downtime.

References in periodicals archive ?
Due to the mission critical nature of many government facilities, locational restrictions, and various procurement factors, renewal probability in the government sector has historically been high.
The property offers high quality stable cash flow with long-term leases and significant tenant investment ($30+ million by NBA Entertainment for state-of-the-art production space used to create their Emmy-winning TV programs) increasing renewal probability.
Jimmy Goodman, Partner of The Boulder Group, added, “Short term single tenant properties leased to CVS are in high demand due to the high renewal probability and the attractive yield.”
Every 60 days thereafter, there are subsequent e-mail inquires about the transaction status: what's the renewal probability? Insite imposes a disciplined approach to managing tenant relationships.
For example, the "effective vacancy rate" is the annual vacancy rate that is equivalent to the original assumptions regarding the renewal probability and months vacant (if not renewed) assumptions regarding existing leases.
The renewal probability for apartments was 47.9 percent, time to re-lease was 3.3 months, and vacancy loss was 6.1 percent.
Jimmy Goodman, Partner of The Boulder Group, added, “Newly constructed GSA assets are in high demand as they have a historic renewal probability of over 90%.”
While there is a general agreement among those surveyed that the renewal options and contingent rents should be included in the measurement, there are concerns about the subjectivity surrounding the estimation of renewal probability, renewal rent and contingent rent, as well as the administrative burden of the required reassessment of those estimates every reporting period.
In this regard, it should be noted that the lease renewal probability assumption and the estimate of downtime between leases has a distinct vacancy implication, as indicated in the following example:
Consider the selection of market rent, tenant renewal probability, vacancy and collection loss projections, and expense estimates.
(3.) These include market rent, lease terms, rent and expense growth rates, renewal probability upon lease expiration, downtime between leasing if a tenant vacates, tenant improvements, and leasing commissions.