How it works
The cash flow is the list of money in and out by year. Write that list first.
- First ask if the space works. Then list the cash. Then discount.
- If two options differ by a door, a dock, or a labor pool, write that beside the NPV.
- If the term is full of options, show cases. Do not force one NPV to hold every path.
- If data is missing, say 'incomplete' instead of inventing a precise rank.
Formula in words. Use NPV only after cash is complete enough that a missing line would not flip the rank by itself.
| Input | Meaning |
|---|---|
| Fit | Can the team work here |
| Cash completeness | Are extras and credits on the page |
| Options | Renewal, exit, and expansion paths |
| NPV | Only after the three rows above |
Worked example
Here is a teaching sample. It is not customer data and not a result from a live client.
| Metric | Lease A | Lease B |
|---|---|---|
| Start rent | $45,000 | $41,850 |
| Year-1 extras | $7,000 | $7,490 |
| Year-1 credit | $0 | $0 |
| Sample NPV | $383,389 | $363,950 |
| Year | Rent | Extras | Credit | Cash out | Value today |
|---|---|---|---|---|---|
| Year 1 | $45,000 | $7,000 | $0 | $52,000 | $48,148 |
| Year 2 | $45,900 | $7,210 | $0 | $53,110 | $45,533 |
| Year 3 | $46,818 | $7,426 | $0 | $54,244 | $43,061 |
| Year 4 | $47,754 | $7,649 | $0 | $55,403 | $40,723 |
| Year 5 | $48,709 | $7,879 | $0 | $56,588 | $38,513 |
| Year 6 | $50,170 | $8,115 | $0 | $58,285 | $36,729 |
| Year 7 | $51,675 | $8,358 | $0 | $60,033 | $35,029 |
| Year 8 | $53,225 | $8,609 | $0 | $61,834 | $33,407 |
| Year 9 | $54,822 | $8,867 | $0 | $63,689 | $31,860 |
| Year 10 | $56,467 | $9,133 | $0 | $65,600 | $30,385 |
| Sample NPV | — | — | — | — | $383,389 |
How to read the sample
Sample NPV for the clean-but-wrong site is about $383,389. A second path lands near $363,950. That gap is a talking point, not a promise.
No credit. The site still may lose on fit. If one path wins only because a credit sat in the wrong year, start over.
Year notes for the clean-but-wrong site
- Year 1 of the clean-but-wrong site has rent of $45,000.
- Shared building cost is $7,000.
- No extra credit shows up this year.
- Cash out this year is about $52,000. No credit. The site still may lose on fit.
- Later cash gets a shrink for time. At 8 percent, year 1 is worth about $48,148 today.
- Next, year 2 rent is $45,900.
- CAM, which is a shared building cost, is $7,210.
- There is no credit in this year.
- You pay about $53,110 this year after extras and credits. A smooth step-up does not fix a bad location.
- Time shrinks later cash. At 8 percent, year 2 is worth about $45,533 today.
- Then year 3 rent is $46,818.
- Extras for the building come to $7,426.
- Credits skip this year.
- The net cash this year is about $54,244. Cheap later years cannot buy missing labor.
- Waiting has a price. At 8 percent, year 3 is worth about $43,061 today.
- After that, year 4 rent is $47,754.
- The shared building cost this time is $7,649.
- No extra credit shows up this year.
- Cash out this year is about $55,403. The model looks clean. The operations question remains.
- Later cash gets a shrink for time. At 8 percent, year 4 is worth about $40,723 today.
- In year 5 of the clean-but-wrong site, rent is $48,709.
- Shared building cost is $7,879.
- There is no credit in this year.
- You pay about $56,588 this year after extras and credits. This is the year people forget to talk about risk.
- Time shrinks later cash. At 8 percent, year 5 is worth about $38,513 today.
- Year 6 of the clean-but-wrong site has rent of $50,170.
- CAM, which is a shared building cost, is $8,115.
- Credits skip this year.
- The net cash this year is about $58,285. Keep this later year in the sum for the sample.
- Waiting has a price. At 8 percent, year 6 is worth about $36,729 today.
- Next, year 7 rent is $51,675.
- Extras for the building come to $8,358.
- No extra credit shows up this year.
- Cash out this year is about $60,033. The row still belongs in the sum for the long path.
- Later cash gets a shrink for time. At 8 percent, year 7 is worth about $35,029 today.
- Then year 8 rent is $53,225.
- The shared building cost this time is $8,609.
- There is no credit in this year.
- You pay about $61,834 this year after extras and credits. Keep this later year in the sum for the long path.
- Time shrinks later cash. At 8 percent, year 8 is worth about $33,407 today.
- After that, year 9 rent is $54,822.
- Shared building cost is $8,867.
- Credits skip this year.
- The net cash this year is about $63,689. The row still belongs in the sum for the long path.
- Waiting has a price. At 8 percent, year 9 is worth about $31,860 today.
- In year 10 of the clean-but-wrong site, rent is $56,467.
- CAM, which is a shared building cost, is $9,133.
- No extra credit shows up this year.
- Cash out this year is about $65,600. Keep this later year in the sum for the long path.
- Later cash gets a shrink for time. At 8 percent, year 10 is worth about $30,385 today.
Add those year values. The sample NPV for the clean-but-wrong site is about $383,389. This is a teaching sample, not a client result.
Trusted sources
These are public references. They are not endorsements and not client results.
How to use this with OccupancyNPV
This page answers the concept. OccupancyNPV applies it inside a DealWorkspace: enter lease scenarios, review cash-flow and occupancy cost, then compare NPV and discount-rate sensitivity. OccupancyNPV NPV is not the same as a face-rent comparison. OccupancyNPV is not a CRM or lease-administration suite, and this page is not legal or investment advice.
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