Weighted Average Lease Term (WALT): Formula, Worked Example and the As-Of Date Trap

What WALT Measures

Weighted average lease term is how long the income is contracted for, weighted so that the tenants paying the most rent count the most. It is the single clearest measure of how soon a property has to go back to the market.

A WALT of 6.5 years does not mean every lease runs 6.5 years. It means that, weighted by rent, the average dollar of income is contracted for another 6.5 years. A property with one anchor on a 15-year lease and a dozen small tenants on two-year deals can carry a long WALT while most of its tenants roll shortly — which is why WALT is read alongside an expiration schedule, never instead of one.

A Worked Example

Four tenants, weighted by the rent each pays:

WALT = 6,520,000 ÷ 1,000,000 = 6.52 years

The unweighted average of those four terms is 4.1 years. The gap between 4.1 and 6.5 is the anchor, and which of the two figures is right depends on the question: 6.5 years is how long the income is secured, 4.1 years is how soon the leasing team is busy.

The As-Of Date Trap

A rent roll is a snapshot. It was run on a particular date, and every remaining term on it is measured from that date.

Measure remaining terms from today against a rent roll run four months ago and every term is four months too short. WALT falls, expirations appear to have moved closer, and nothing in the output says why. The error is invisible precisely because the arithmetic is correct — it is the reference point that is wrong.

The rule is that the rent roll's own as-of date is the anchor for every lease analytic derived from it: WALT, the expiration schedule, month-to-month exposure, lease-start seasoning. Where a document states no as-of date, today is a reasonable fallback, but the output should say which frame it is in rather than substituting one silently.

This is also why WALT should be recomputed when a new rent roll is loaded rather than aged forward. A WALT that decays by one day per day is only correct if no leasing happened, which is the one thing a rent roll exists to tell you.

What to Exclude, and What to Count Separately

Three categories need deciding before the average is taken, and each is a different kind of exposure:

• Leases already expired at the as-of date. These are holdovers the rent roll was itself reporting. Including them drags the average toward zero and understates the remaining term of the leases that are genuinely running. Exclude them from WALT — and report the count separately, because a holdover is real risk, just not term risk.
• Month-to-month tenancies. A unit that is occupied with no lease end date has no remaining term to weight. It does not belong in the average at all. It belongs in a month-to-month exposure figure, which for some assets is the more important number of the two.
• Renewal options. Not certain, so not in the base WALT. Where a longer figure including options is useful, report it as a second, clearly labelled number rather than blending discretionary term into the contracted one.

Rent-Weighted or Unit-Weighted?

Rent-weighted, wherever the rent roll carries rents. A $3,000-a-month unit rolling matters more than a $900 one, and unit-weighting treats them as equal.

Unit-weighting is a fallback for a roll that quotes no rents, not a choice — and a WALT computed that way should say so, because the two figures are not comparable. Square-footage weighting sits between the two and is common in office and industrial, where rent per square foot is fairly uniform within a building; it misweights badly in mixed-use, where it is not.

Common Mistakes

• Measuring from today rather than the rent roll's as-of date. Silently shortens every term. See above.
• Including leases already expired at the as-of date. Pulls the average down and hides holdover exposure inside a term figure.
• Counting renewal options as certain. Inflates WALT with term the tenant may simply not take.
• Weighting by unit count when rents are available. Treats a studio and a penthouse as the same risk.
• Reading WALT without the expiration schedule. A long WALT concentrated in one anchor and a long WALT spread evenly are very different assets.
• Comparing WALT across property types. Multifamily WALT is measured in months and industrial in years; the two numbers do not mean the same thing.

What It Looks Like in a Model

In Crevanta, WALT is measured from the rent roll's own as-of date, and that date is shown beside every lease analytic derived from it — so a reader can tell at a glance what period the term is measured over. Leases already expired at that date appear as holdover exposure and occupied units with no end date as month-to-month, each as its own figure rather than averaged into the term.

Where a rent roll states no as-of date, the output says which frame it is in rather than substituting one silently. That single disclosure is what separates a WALT you can defend from one that is quietly four months short.

Sources

• National Multifamily Housing Council — Quarterly Survey of Apartment Market Conditions: quarterly readings on leasing and market conditions.
• NCREIF: institutional property-level performance benchmarks by sector.
• Institute of Real Estate Management: standards and terminology for lease and occupancy reporting.