Overview · What & why
A decision, before a calculation.
Stabilized occupancy is an endpoint; lease-up is the path to it. Space may become available before leases are signed, and signed leases may include free rent or later commencements. Forecasting target rent on all space from day one can hide the main risk of a repositioning project.
A concrete example
If occupancy rises evenly from 50% to 90% during a year, average occupancy is 70%. At 80,000 SF and $12/SF, that yields $672K annual base rent, compared with $864K at the ending occupancy for a full year.
What to remember
Model the path to stabilization, not just the destination.
Before using this in a project: Lease pipeline, start dates, tenant departures, rent steps, free rent and broker leasing assumptions.