Assigning a renewal probability to a tenant feels like false precision the first time you do it. Seventy percent, according to whom? The discomfort is understandable and misplaced. The number was never the point. The point is that writing a number forces you to look at each tenant individually and assemble the evidence, and it is the evidence-gathering, tenant by tenant, that separates underwriting from arithmetic.
So what actually forms the number. Start with the economics of the lease itself: a tenant paying meaningfully below market has a powerful reason to stay and you have a mark-to-market decision to make at renewal, while a tenant above market has a running incentive to leave the moment an alternative appears. Then the tenant's investment in the space. A restaurant with a full buildout, a medical user with plumbing in the walls, a business whose customers know the address: these tenants face real moving costs and renew at high rates. A user in vanilla space with a truck and a lease can be gone in thirty days.
Then the business underneath the lease. Is the operation visibly healthy, are there sales figures or estoppel signals worth reading, is the category growing or dying in this submarket. Then the market context: what would this tenant pay across the street, is there anywhere across the street to go, and who holds the leverage when the option window opens. Options themselves are evidence, since a tenant who negotiated renewal options was planning to use the space, and an option at a below-market rate is close to a guarantee they will.
Two disciplines keep the number honest. First, write down the reasoning, not just the percentage, because eighteen months from now, when the tenant surprises you, the record of why you believed seventy percent is how you get better rather than just older. Second, resist the flat default. Assigning every tenant seventy percent is the blanket vacancy assumption wearing a costume; the entire value of the exercise is the variance between the ninety percent tenant and the forty percent tenant, and what that variance does to the deal.
What it does to the deal is the downstream half. Each probability pairs with a downtime, a tenant improvement cost, and a leasing commission, and the model probability-weights the rollover cost across the schedule, which turns a page of judgments into a cash flow consequence you can see and defend. PropCalc™ carries those assumptions per tenant natively, so the judgment work stays where it belongs, in your head, and the assembly work moves where it belongs, out of it. The number will never be exactly right. It does not have to be. It has to be reasoned, documented, and different for different tenants, because the tenants are different, and pretending otherwise is the actual false precision.