Glossary
Weighted Average Lease Term (WALT)
Weighted average lease term (WALT), also called weighted average lease expiry (WALE), is the average remaining lease term across a property's tenants, weighted by each tenant's rent or leased area. It measures how long a property's income is contractually secured and is a key indicator of rollover risk for commercial real estate.
Formula
Example
A property has three tenants. Tenant A pays $500,000 of annual rent with 8 years remaining, Tenant B pays $300,000 with 3 years remaining, and Tenant C pays $200,000 with 1 year remaining. WALT by rent = (($500,000 x 8) + ($300,000 x 3) + ($200,000 x 1)) / $1,000,000 = ($4,000,000 + $900,000 + $200,000) / $1,000,000 = 5.1 years.
How it is used in underwriting
Lenders and investors use WALT to judge income durability. A long WALT means most income is secured by existing leases, which supports higher leverage and lower cap rates, especially when tenants have strong credit. A short WALT means more leases expire soon, exposing the property to vacancy, downtime and TI/LC costs. Underwriters compare WALT with the loan term: if most leases expire before maturity, refinance risk rises. They also calculate WALT for the largest tenants and review the year-by-year expiration schedule, because a single average can hide a concentration of expirations in one year.
WALT can be weighted by rent or by square footage, and the two can differ when rents vary widely across tenants; rent weighting better reflects income risk. Some analysts calculate WALT to the first break or termination option rather than to lease expiry, which is more conservative and often more realistic. WALT says nothing about tenant credit quality: a long lease with a weak tenant may be worth less than a shorter lease with a strong one. For single-tenant net lease properties, the remaining lease term and the tenant's credit are effectively the entire underwriting case.
Frequently asked questions
What is a good WALT?
There is no universal standard, but longer is generally better for income stability. Investors in stabilized office or industrial properties often prefer a WALT that comfortably exceeds the expected hold or loan term. Shorter WALTs are acceptable when rents are below market and re-leasing is expected to increase income.
Should WALT be weighted by rent or area?
Rent weighting is more common for underwriting because it reflects how much income is at risk when each lease expires. Area weighting shows how much physical space rolls over. When tenants pay similar rents per square foot, the two measures are close; when they do not, rent weighting is more informative.
What is the difference between WALT and WALE?
They are the same concept. WALT, weighted average lease term, is the common term in the United States, while WALE, weighted average lease expiry, is more common in Australia, the United Kingdom and other markets. Both measure average remaining lease duration weighted by rent or area.
Related terms
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