ARGUS - Vacancy & Credit loss vs Static Tenants - Distressed Office Product
Hey, in this office environment, what is best-practice for modeling vacancy/credit loss in ARGUS for distressed products?
For example, say a building is 50% occupied and you don't actually believe it'll lease up to 90-95% in any scenario and believe true market occupancy to be somewhere around 80%. Could I create speculative, static leases that remain empty throughout the forecast (accounting for 20% of GLA) and forecast a lease-up other units to grow overall occupancy to 80%? Afterwards have no vacancy/credit loss applied? I think this makes sense since this would not apply TIs/LCs on the 20% of space you don't truly believe will become occupied. Let me know if my reasoning is flawed here. I'm semi-new to argus so I'm trying to learn what's "best practice."
Yes. Usually I just name them "Static" and do the start date as like 240 months so it's essentially just static
This. I've only been touching distressed office the past few months and this is how we do it. Another scenario to look at is adding a short term lease that is well below the recovery $/SF that doesn’t include TI’s.
That's what I do
Why pay for leasing that you don't get income for lol
Sounds good, yeah I totally agree. Would you apply a 0% vacancy/credit loss as well?
I'd still carry credit loss, however, unless you are excluding absorption and turnover from your vacancy factor, it is a moot point.
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