Market Leasing Assumptions¶

Overview¶

A market leasing assumption (MLA) is a reusable set of leasing economics for a portfolio. Credence uses each unit's primary MLA to project income and leasing costs when contractual lease activity ends or when a unit is vacant and still needs forecast coverage.

MLAs matter for:

• Building budgets with projected lease charges after in-place leases roll
• Estimating market rent for units on lease and property analytics
• Keeping new-lease and renewal assumptions consistent across similar spaces

You create MLAs, assign them to units (one primary assignment per unit), and Credence blends new-lease versus renewal values using renewal probability when it drafts budget projections.

Definitions¶

• Market leasing assumption (MLA): Named assumptions for rent, term, downtime, free rent, tenant improvement, leasing commission, expense reimbursement, and related rates.
• New vs renewal: Parallel assumption columns. Credence blends them with renewal probability when projecting budget amounts.
• Primary assignment: The MLA Credence uses for a unit. A unit may have multiple MLA assignments over time, but only one is primary.
• Downtime: Expected vacant months between an ending lease and the next occupancy, before free rent and rent begin in the projection.
• Structural vacancy: A shared Credence MLA available when assigning units. Use it when a unit should sit on a system vacancy assumption rather than a portfolio leasing profile.
• Projected lease charge: Budget lines Credence drafts from a unit's primary MLA (rent, CAM/reimbursement, absorption, free rent, tenant improvement, and leasing commission), separate from contractual lease charges.

Rules and Behavior¶

Creating and maintaining MLAs¶

• Each MLA belongs to a portfolio (required when you add or edit an MLA in Credence).
• Shared MLAs with no portfolio (including structural vacancy) remain available for assignment where Credence exposes them. Portfolio-scoped MLAs are the ones you create, edit, and delete in the normal MLA workflow.
• Deleting a portfolio MLA soft-deactivates it (sets an inactive date) rather than removing history. Shared MLAs without a portfolio cannot be deleted.
• Manage MLAs can include or exclude inactive records.
• Percentage fields (renewal probability, escalations, leasing commissions, annual market rent growth) are entered as percents from 0 to 100.
• Most economic fields are optional; blank values are treated as zero when Credence blends amounts for budgeting.

Assigning MLAs to units¶

• Assign by unit for the properties in your current property selection, or bulk-assign one MLA to active units on a property (optionally filtered by unit type).
• Assign-by-unit lists active units on selected properties that have area greater than zero.
• Saving an assignment makes that MLA primary for the unit and clears primary on the unit's other assignments.
• The same unit and MLA can be linked only once.
• For vacant units, you can set an optional start date on the assignment. When the unit has no latest lease end date, Credence uses that start date (if present) as the rollover anchor for projections.
• Units without a primary MLA do not generate MLA-based projected lease charges in the budget.

How MLAs feed budgets and analytics¶

When Credence drafts a property budget, it:

1. Uses contractual lease charges while they remain in place.
2. For each unit with a primary MLA whose occupancy ends before the budget end date, drafts projected lease charges from that MLA.
3. Posts those projected amounts to the property chart's default accounts for rental revenue, CAM/reimbursement, absorption, free rent, tenant improvement, and leasing commission (when those defaults exist).

Projected lines appear as projected lease activity on the budget and stay tied to the unit and MLA used to draft them.

Separately, a unit's market rent uses the primary MLA's new rent per area (not the blended renewal-weighted rent). Lease analytics that show market rent follow that definition.

Annual market rent growth and new/renewal escalation are stored on the MLA for reference. Current budget projections do not apply those growth rates when spreading projected rent.

Calculation Details¶

Blended (probability-weighted) value¶

For fields that have both new and renewal inputs:

Blended value = (New × (1 − Renewal probability)) + (Renewal × Renewal probability)

Renewal probability is the chance the incumbent renews. Example: renewal probability 65%, new rent $4.85 / area, renew rent $4.35 / area:

Blended rent per area = (4.85 × 0.35) + (4.35 × 0.65) = 4.525

When Credence projects a unit¶

Credence projects a unit when:

• The unit has a primary MLA, and
• The unit's latest lease end date (or assignment start date / budget-start fallback when vacant) is before the budget end date

A unit is treated as vacant for projection timing when it has no latest lease end date, or that date is before the budget start date.

Rollover start (baseline) = day after the latest lease end date (or assignment start date / day before budget start when those are missing).

Amounts used in budget projections¶

Downtime months (occupied rollover) = round(Downtime × (1 − Renewal probability))

Downtime months (vacant unit) = 0 in the projection math (vacancy is already reflected in timing)

Free rent months = round of the blended free-rent months, with a minimum of 1 month when projections run

Timing of projected charges¶

Relative to the rollover start (baseline):

• Rent and CAM: from baseline through downtime + free rent + 12 months (one year of rent after free rent in the draft window)
• Tenant improvement and leasing commission: one-time on the date after downtime
• Absorption: offsets rent during downtime; for vacant units, absorption can begin at the budget start when a downtime window applies
• Free rent: offsets rent for the free-rent months immediately after downtime

Only charge types whose default accounts exist on the property's chart are drafted. Amounts are then prorated into monthly budget detail lines for the budget period.

Field reference¶

Common Scenarios¶

• Office stack with one profile: Create an "Office Market" MLA with higher new rent, longer new term, and higher TI than renewals. Bulk-assign it to office units on the property so the next budget drafts consistent rollover economics.
• Flex vs office on the same asset: Maintain separate MLAs and assign by unit type so flex space does not inherit office TI and commission assumptions.
• Vacant suite with a known backfill date: Assign the portfolio MLA and set the assignment start date so projections anchor to that date instead of inventing an earlier rollover.
• Structural vacancy / no market fill: Assign structural vacancy when the unit should not use portfolio leasing assumptions for assignment defaults.
• Lease expires mid-budget: Contractual rent stays on the budget through the lease end; after that, Credence drafts projected rent, concessions, and leasing costs from the unit's primary MLA through the remainder of the budget window.