Somewhere on almost every pro forma sits a line that reads something like general vacancy, five percent. It is one of the most universal conventions in underwriting and one of the least examined, because it is asked to do three different jobs at once and does none of them: it stands in for credit loss, for downtime between tenants, and for lease-up of existing vacancy, three phenomena with different causes, different timing, and different cures.
The deeper problem is categorical. Vacancy in a multi-tenant building is not a rate. It is a set of events with dates attached. Suite 4 rolls in month 19 and either renews or goes dark for a stretch. The vacant end cap either leases in the first year or it does not. Each event has a probability, a duration, and a cost, and the building's actual occupancy path is the sum of those events landing on the calendar, lumpy and specific, not a smooth annual haircut.
The smear penalizes and flatters in equal measure, which is what makes it dangerous rather than merely conservative. A fully leased center with a decade of weighted lease term gets charged five percent a year for vacancy it is contractually unlikely to experience, which quietly kills deals that deserved offers. A center with three expirations stacked in year two gets the same five percent, which quietly funds offers on deals that deserved fear. One assumption, two opposite errors, and no way to know which one you are making, because the assumption contains no information about this building.
There is also a defense problem. Present a lender or partner with five percent vacancy and the only available conversation is whether it should be four or six, a debate about a convention. Present them with a schedule, this lease, this expiration, this renewal probability, this downtime, and the conversation becomes about the property, which is a conversation you can win with facts. Blanket assumptions are not just imprecise. They are unarguable, in the bad sense: there is nothing underneath them to argue from.
The alternative is not heroic effort anymore. Modeling vacancy as events means putting rollover assumptions on each lease and letting the model assemble the occupancy path, and that is native behavior in a per-tenant simulator rather than a spreadsheet project. PropCalc™ builds the vacancy picture from the lease schedule itself, so the number that lands in the pro forma is a description of this building's actual calendar rather than an industry habit. The five percent line survived for decades because the alternative was expensive. It is not expensive now, and once you have underwritten from the schedule, the smear starts looking like what it always was: a placeholder for work.