WALT (Weighted Average Lease Term)

How WALT works

A rent roll lists tenants one by one. WALT compresses that list into a single number: on average, how long is the income on this property contracted for? The calculation weights each lease by how much it matters, then averages the remaining terms.

WALT = Σ (remaining term × weight) ÷ Σ weight

The weight is one of two things. Weighting by annual base rent measures how long the income is secured. Weighting by leased square feet measures how long the space is committed. The remaining term is measured from a stated as-of date to the lease expiration, so WALT shrinks every year that passes unless leases are renewed or new ones are signed. A property with a 5.0-year WALT today has, with no new leasing at all, a 4.0-year WALT a year from now.

Worked example: five tenants

The figures below are assumptions for illustration, not quoted market data. A 50,000-square-foot multi-tenant building has five tenants. Remaining terms are measured from today.

Tenant	Sq ft	Rent per sq ft	Annual base rent	Years remaining	Rent × years
A	20,000	$24	$480,000	8.0	3,840,000
B	12,000	$30	$360,000	2.5	900,000
C	8,000	$28	$224,000	1.0	224,000
D	6,000	$32	$192,000	4.0	768,000
E	4,000	$26	$104,000	0.5	52,000
Total	50,000		$1,360,000		5,784,000

• Rent-weighted WALT: 5,784,000 ÷ 1,360,000 = 4.25 years
• Area-weighted WALT: [(20,000 × 8.0) + (12,000 × 2.5) + (8,000 × 1.0) + (6,000 × 4.0) + (4,000 × 0.5)] ÷ 50,000 = 224,000 ÷ 50,000 = 4.48 years

The two numbers differ because the tenants that pay more per square foot (B, D) have shorter terms than the tenant that pays least (A). Area weighting flatters the building by giving the long, cheap lease more credit than it earns in rent.

The average also hides the shape. Tenants B, C and E, which together pay $688,000, or about 51% of the rent, expire within three years. If the largest tenant, A, left, the remaining four leases would carry a rent-weighted WALT of only about 2.2 years on $880,000 of rent. That is why a lender who sees a 4.25-year WALT will still ask for the rollover schedule behind it.

Now suppose tenant B renews for five more years. Its remaining term goes from 2.5 to 7.5 years, and the rent-weighted WALT rises to (5,784,000 + 360,000 × 5) ÷ 1,360,000 = about 5.58 years, a gain of 1.3 years from one lease. WALT responds most to extending large, high-rent leases.

WALT, WALE and WAULT

These names are often used interchangeably. WALT is the common label in U.S. commercial real estate; WALE and WAULT turn up in other markets and in some fund reports, and some reports use one of them specifically for the term to the first termination option, so confirm the basis in each report. The differences that matter are not the label but the choices behind the number: weighted by rent or by area, measured to the lease expiration or to the first tenant termination option, and measured as of which date. Two reports can both say "WALT" and disagree by a year or more. When you compare properties or lender quotes, ask for the basis.

WALT vs. similar measures

Measure	What it tells you	How it differs
WALT	Average time income is contracted for	One blended number; hides how leases cluster
Rollover schedule	How much rent or space expires each year	Shows the clustering that WALT averages away
Occupancy	How much space is leased today	Says nothing about how long the leases last
Original lease term	Length of each lease when signed	Ignores how much time has already passed
TI/LC reserve	Cost to re-lease space that rolls	A dollar figure that follows from the rollover schedule

Practical details of the calculation

• Use dates, not guesses. Take each lease's expiration date, subtract the as-of date, and divide the days by 365 to get years. Pick the as-of date deliberately, usually the date of the rent roll, and use the same date for every lease.
• Vacant space. Two conventions exist, and they give different answers. Counting vacant space at zero years pulls WALT down and shows the whole building; leaving it out measures only the leased space. Say which you used. Ask the lender, too, because the same rent roll can read differently.
• Renewal options. A tenant's option to renew is the tenant's choice, not a commitment. It is usually left out of the calculation until it is exercised, but confirm that with each lender instead of assuming it.
• First termination option. Run it both ways. Suppose tenant A in the example above has a right to terminate in year 3. Measured to that date, its 8.0 years become 3.0 and the rent-weighted WALT drops to (5,784,000 − 480,000 × 5) ÷ 1,360,000 = about 2.49 years, roughly 1.8 years lower than the 4.25 shown to expiration.

WALT and property value

A buyer sizing up the same building asks the same question a lender does: how long is the income contracted? A long WALT with sound tenants usually makes income easier to underwrite and may support a lower cap rate, while a short WALT leaves the buyer to price in vacancy and re-leasing costs. Neither effect follows a fixed formula, so treat WALT as one input to the valuation and not as a multiplier.

Why lenders care

A commercial loan is repaid from the property's income, and the leases are the contract for that income. A long WALT means the lender can see more years of income in signed documents, and the loan can be sized on it with more confidence. A short WALT means the lender is underwriting a forecast: renewals, new tenants, concessions and downtime that have not happened yet.

• Loan sizing. A short WALT does not change the formula, but it changes the inputs: a lender may assume more vacancy and credit loss and may deduct or escrow re-leasing costs. Both lower the net operating income the loan is sized on, and with it the DSCR and debt yield tests.
• Reserves and sweeps. Heavy rollover inside the loan term is what produces TI/LC reserves, and a single large tenant with a near-term expiration can lead to a cash sweep.
• Term versus lease length. Compare WALT with the loan maturity yourself. If the average lease ends before the loan does, repayment depends on re-leasing the building, which is leasing risk in the later years. How a lender treats that varies by lender and property type, so check the term sheet rather than assuming a rule.
• Exit value. A buyer or refinancing lender will ask the same question you are being asked now. A building whose WALT has been rebuilt before maturity is easier to sell or refinance.

What to watch for

• Know which basis is being used. Rent-weighted and area-weighted figures can differ, as in the example above. If you are quoting WALT in a loan package, show the basis and the as-of date.
• Check for early termination rights. A tenant with eight years left but a termination option in year three has a functional term of three years. A lender may measure to the first date a tenant can leave, so show both numbers.
• Do not count expired or month-to-month leases at their original length. Month-to-month and holdover tenants contribute close to zero years.
• Leases that are signed but not yet started. Whether they count depends on the lender; get that treatment in writing before you rely on the figure.
• Do not trade rent for term carelessly. Extending a lease by cutting the rent raises WALT but can lower NOI, which is the number loan sizing is built on. Run both, using the rent per square foot calculator to compare the new rate with the old.
• Look at tenant credit, not only term. A long lease to a tenant that cannot pay is worth little. Triple-net leases shift operating costs to the tenant, which improves the quality of the income but does not lengthen it.
• Sequence renewals deliberately. If several leases expire together, a lender sees one cliff. Staggering expirations, or renewing early the leases that expire inside the loan term, flattens it.

How to improve WALT before you apply

Most borrowers cannot change a lease's remaining years, but they can change which leases get extended and when. The highest-value moves, in order, are early renewals of the largest rent payers, converting month-to-month tenants to signed terms, and replacing the shortest leases as they come due. Each is a negotiation with a tenant and may cost a tenant improvement allowance or a commission; the TI allowance entry shows how that cost is structured. Run the arithmetic both ways: the cost of the concession against the proceeds or terms the longer WALT unlocks. For a building still filling its space, see lease-up, where WALT starts low by definition and is built over time.

WALT by property type

Single-tenant net lease. WALT is the remaining term of the lease, and everything else about the loan follows from it.

Retail. Shopping centers combine long anchor leases with short small-shop leases; the rent-weighted and area-weighted numbers can differ widely. See retail property loans.

Office. Longer terms are common for large tenants, and rollover drives reserves. See office building loans.

Industrial. Often longer leases to fewer tenants, so one expiration can move the number sharply. See industrial property loans.

Multifamily. Leases are typically a year or less, so WALT carries little meaning; lenders look at occupancy and rent trends instead. See multifamily loans.

Where WALT shows up by loan type

• Permanent financing: the rent roll and its rollover schedule are part of every multi-tenant package.
• CMBS loans: lease rollover is part of the underwriting package, and heavy near-term rollover is commonly addressed through reserves.
• Bridge loans: a low WALT can be the reason a property needs a bridge; the plan is then to extend leases and refinance.

The bottom line

WALT is a one-number summary of how long a building's income is under contract. Build it from your own rent roll before a lender does, on both bases, with the as-of date and any termination options. Use it alongside the rollover schedule, not instead of it, and act on the leases that move it most. When you are ready to see how a lender would read your rent roll, bring us the rent roll and T-12. For related reading, see what NOI is and how lenders use it.

Sources: figures in the worked example are illustrative assumptions and the arithmetic is shown in full. WALT, WALE and WAULT are industry terms with no single regulatory definition; the weighting basis and as-of date should be stated wherever the figure is used.