The direct answer
Lease rollover risk is the possibility that expiring tenants renew at different terms, vacate, require concessions or create downtime and leasing costs. The core tool is an expiration schedule that shows when rent and square footage roll, how concentrated those expirations are, and how much cash flow depends on successful renewals.
Build a time-based expiration schedule
Group leases by month, quarter or year and track both rent and occupied area. A year with a large share of NOI or square footage expiring deserves more attention than a year with many small, diversified leases.
To apply the approach to an editable scenario, use the Commercial Real Estate Investment Calculator. For the neighboring question, explore Commercial Rent Calculator.
Model renewal and downtime assumptions separately
Renewal probability, market rent, free rent, tenant improvements, commissions and downtime all affect the economics of rollover. Avoid collapsing them into one blanket vacancy assumption.
Stress major tenant events
A single large tenant can dominate the property’s cash flow. Model renewal, downsizing and departure scenarios, including the time and cost required to re-lease the space.
Worked example
If 35% of a building’s rent expires in year 3, a base case might assume partial renewals and six months of downtime for vacant space, while a downside case assumes more tenant departures and higher concessions.
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Common mistakes and limitations
Do not measure rollover risk only by the number of expiring leases. Weight expirations by rent, area, tenant quality and replacement difficulty.
Does not calculate commercial loan terms, taxes or future sale value unless supplied in an optional scenario mode.
Frequently asked questions
What is a lease expiration schedule?
It is a timeline showing when leases expire, often summarized by rent or square footage to highlight concentration.
Is high rollover always bad?
Not necessarily. It can create mark-to-market opportunity, but it also increases uncertainty, downtime and leasing-cost risk.
Sources and further reading
The article’s examples are illustrative arithmetic. The references below provide context for operating, valuation or transaction concepts; they do not endorse the assumptions or the calculator.
- Office of the Comptroller of the Currency — Comptroller's Handbook — Commercial Real Estate LendingNOI, direct capitalization, cap-rate valuation and DCF concepts for commercial real estate.
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