Loss to Lease

Loss to lease is the difference between a property's current in-place rents and the prevailing market rents, representing unrealized income potential when existing leases are below market rates. For example, if market rent is $25/SF but a tenant's lease locks them in at $20/SF, the loss to lease is $5/SF per year. On a 10,000 SF space, that's $50,000 in annual income the property isn't capturing. Loss to lease is a key metric for value-add investors because it signals upside potential - as leases roll to market rates, NOI increases without any capital improvements. For NNN investors, loss to lease creates a natural rent growth trajectory that can drive significant value creation at disposition. Properties with high loss to lease are often priced at lower cap rates because sophisticated buyers underwrite to the higher stabilized income.

Loss to Lease is a key concept that affects property valuation, financing decisions, and investment returns in the triple net lease market. Understanding Loss to Lease helps investors make informed acquisition and management decisions.

Loss to Lease directly influences how commercial properties are valued, financed, and traded. Changes in Loss to Lease can impact cap rates, NOI calculations, and overall investment performance for net lease properties.

The daily intelligence platform for retail net lease investors. Data-driven insights for smarter NNN investing.