Trended vs untrended
Newbie here to the real estate industry, can someone explain to me what trended rents vs untrended rents are and how they would be calculated ?
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Trended means you're growing rents. Example- rents today is $3, you are growing rents by 5%, trended rents are $3*(1+5%). Untrended rents in this example is $3.
Un-Trended rents are non growth compounded rents. E.g. during a development, you get rental comps that the market can support today but your building may not be built for 2-3 years, so you can grow the rents during this time(trended) using a 2-3% growth rate, or keep them at the current price per square foot. The latter is more conservative.
I’d just add that the point of untrended / trended analysis is to inform your yield on cost. Idea being if untrended YOC is lower than cap rates (or not materially greater on a risk adjusted basis) you should just go out and buy a building instead of developing.
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