Lease Analysis with Argus
What’s the best way to preform a lease analysis using Argus? Is it best to analyze just the space that will be impacted/released, or should I analyze the property as a whole?
We’ve got a big tenant who’s going to vacate their space entirely or downsize significantly. They currently occupy ~50k SF across two floor plates and I’m trying to figure out what will be the best leasing strategy (i.e. how/if we should demise the space, smaller or bigger units). I plan on running various different leasing scenarios, changing the suite sizes and the MLA’s.
Appreciate any help!!
Someone can prob give you a better answer but for me I usually just throw it into an Argus model and assess the impacts, but I've also done a cash flow analysis of only the CFs attributable to the individual lease (i.e. calculating NER constant). What your describing sounds like there's infinite possible scenarios and I've never had to deal with that. Best of luck!
It's a return on cost exercise that should view the space going vacant in a silo.
What is your basis in the building (apply basis psf to the 50k sf imminent vacancy)? What is the cost to execute on multi-tenant lease-up? What is the MLA for that scenario? What is the cost to execute on single-tenant lease-up? What is the MLA for that strategy? These are items that would be in your denominator.
How does the market price single VS MT? What would be the market cap rate for each scenario?
With this approach you can determine what the "profit spread" is for each scenario. i.e. spread between RoC and spot cap rate for each scenario.
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