How it works
The cash flow is the list of money in and out by year. Write that list first.
- First compare both leases over the shorter shared window.
- Then show the longer lease's extra years as a second view.
- If a renewal exists, price staying and leaving as cases.
- Say what you assume about the space after year five.
Formula in words. Shared-window NPV first. Extra-year NPV second. Do not silently add them.
| Input | Meaning |
|---|---|
| Short term | The smaller number of years |
| Long term | The extra years |
| Renewal | A choice, not a fact |
| Exit cost | If leaving the short deal has a cost |
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 | $39,000 | $36,270 |
| Year-1 extras | $9,500 | $10,165 |
| Year-1 credit | $5,000 | $2,750 |
| Sample NPV | $357,531 | $344,305 |
| Year | Rent | Extras | Credit | Cash out | Value today |
|---|---|---|---|---|---|
| Year 1 | $39,000 | $9,500 | $5,000 | $43,500 | $40,278 |
| Year 2 | $39,975 | $9,785 | $0 | $49,760 | $42,661 |
| Year 3 | $40,974 | $10,079 | $0 | $51,053 | $40,528 |
| Year 4 | $41,999 | $10,381 | $0 | $52,380 | $38,501 |
| Year 5 | $43,049 | $10,692 | $0 | $53,741 | $36,575 |
| Year 6 | $44,340 | $11,013 | $0 | $55,353 | $34,882 |
| Year 7 | $45,670 | $11,343 | $0 | $57,013 | $33,267 |
| Year 8 | $47,040 | $11,683 | $0 | $58,723 | $31,726 |
| Year 9 | $48,451 | $12,033 | $0 | $60,484 | $30,257 |
| Year 10 | $49,905 | $12,394 | $0 | $62,299 | $28,856 |
| Sample NPV | — | — | — | — | $357,531 |
How to read the sample
Sample NPV for the long-term path is about $357,531. A second path lands near $344,305. That gap is a talking point, not a promise.
Year one of a longer path still needs a credit note. If one path wins only because a credit sat in the wrong year, start over.
Year notes for the long-term path
- Year 1 of the long-term path has rent of $39,000.
- Shared building cost is $9,500.
- A credit of $5,000 lowers the cash you pay that year.
- Cash out this year is about $43,500. Year one of a longer path still needs a credit note.
- Later cash gets a shrink for time. At 8 percent, year 1 is worth about $40,278 today.
- Next, year 2 rent is $39,975.
- CAM, which is a shared building cost, is $9,785.
- There is no credit in this year.
- You pay about $49,760 this year after extras and credits. Shared-window years should match the short deal's years.
- Time shrinks later cash. At 8 percent, year 2 is worth about $42,661 today.
- Then year 3 rent is $40,974.
- Extras for the building come to $10,079.
- Credits skip this year.
- The net cash this year is about $51,053. From here a 10-year deal keeps going.
- Waiting has a price. At 8 percent, year 3 is worth about $40,528 today.
- After that, year 4 rent is $41,999.
- The shared building cost this time is $10,381.
- No extra credit shows up this year.
- Cash out this year is about $52,380. These later years are the extra product.
- Later cash gets a shrink for time. At 8 percent, year 4 is worth about $38,501 today.
- In year 5 of the long-term path, rent is $43,049.
- Shared building cost is $10,692.
- There is no credit in this year.
- You pay about $53,741 this year after extras and credits. Do not hide them inside an average.
- Time shrinks later cash. At 8 percent, year 5 is worth about $36,575 today.
- Year 6 of the long-term path has rent of $44,340.
- CAM, which is a shared building cost, is $11,013.
- Credits skip this year.
- The net cash this year is about $55,353. Keep this later year in the sum for the sample.
- Waiting has a price. At 8 percent, year 6 is worth about $34,882 today.
- Next, year 7 rent is $45,670.
- Extras for the building come to $11,343.
- No extra credit shows up this year.
- Cash out this year is about $57,013. 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 $33,267 today.
- Then year 8 rent is $47,040.
- The shared building cost this time is $11,683.
- There is no credit in this year.
- You pay about $58,723 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 $31,726 today.
- After that, year 9 rent is $48,451.
- Shared building cost is $12,033.
- Credits skip this year.
- The net cash this year is about $60,484. The row still belongs in the sum for the long path.
- Waiting has a price. At 8 percent, year 9 is worth about $30,257 today.
- In year 10 of the long-term path, rent is $49,905.
- CAM, which is a shared building cost, is $12,394.
- No extra credit shows up this year.
- Cash out this year is about $62,299. 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 $28,856 today.
Add those year values. The sample NPV for the long-term path is about $357,531. 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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