Industrial rollover suffers from a flattering comparison. Set against office, with its brutal TI packages and year-long downtimes, an industrial turnover looks nearly free, and pro formas quietly model it that way. Nearly free is not free, and on multi-tenant industrial the gap between the two is a real number that compounds across an expiration schedule, so it is worth pricing the event honestly, both its costs and, unusually among rollover discussions, its upside.
The cost stack, bay by bay. The triple net structure protects the expense side only while a tenant is paying it: a dark bay stops covering its share of taxes, insurance, and CAM the day it empties, and that share lands on the landlord for the full downtime. TI is modest but real, and it concentrates in the office component, the finished share of a flex bay is where the turnover dollars go, plus the unglamorous items, demising changes, door and dock repairs, slab and lighting work, that industrial tours surface. Leasing commissions are a percentage of lease value like anywhere else, and industrial's longer terms make the absolute check larger than the asset class's casual reputation suggests. Downtime is the honest variable: driven by the depth of the tenant pool at that bay's specific size and spec in that submarket, and a park's bays can carry very different downtime assumptions for good reason.
Now the other side, which is currently the more interesting one. Industrial rents in most markets have grown substantially over recent years, and leases signed before that growth are sitting well below market, waiting for an expiration to reprice. Which makes rollover in industrial a double-sided event: the same expiration that carries the cost stack also carries the mark-to-market, and on under-market rent rolls the repricing can dwarf the turnover cost. This is where the standard rollover instinct, dread the expirations, discount the short WALT, gets industrial exactly backwards. A short-WALT park with deeply below-market rents is not a risk profile. It is a business plan with dates attached.
The underwriting, then, is per-bay and two-columned: for each expiration, the honest cost of the turnover against the honest spread to market, weighted by the real odds the tenant renews, and renewal itself repriced, since below-market tenants renew at high rates but the renewal negotiation is where the mark-to-market gets captured or conceded. Blanket assumptions cannot hold both columns at once, which is why they systematically misprice this asset class in whichever direction the analyst feared most.
PropCalc™ carries both columns natively, per-tenant rollover costs and per-tenant rents against market, through the full pro forma, so an expiration schedule reads as what it is: a sequence of priced events, some of which cost money and some of which are the reason you bought the park.