Leases in this market are a flat rate throughout the term and typically written for five years with the tenant paying any increase in expenses over a base year. The market rents are increasing at 3% compounded annually, which means that once a lease expires the rent for the next period is increased by 3% per year from year 1.

The following information describes the lease and rent expectations for each office suite.

Suite 100, comprising 2,500 square feet, is leased to a computer hardware distributor on a five-year lease with two years left. The flat rate is $62,500 per year. There is a high likelihood of a renewal for another five years at the market rate. This space has better-than-average finish and features and is right off the lobby, which generally commands a slightly higher rent.

Suite 101, comprising 3,900 square feet, is leased to an electronic reproduction firm on a seven-year lease that was signed last year at a flat rate of $103,350. This space has better-than-average finish and features. This space is nicer and off the lobby as well.

Suite 112 has 4,600 square feet and currently vacant. The market rent is expected to be 25.00 per square feet, which is the amount that should be used starting in the first year for valuation purposes. A new lease can be assumed to be for five years, and it will roll over at the market rate. This space is assumed to be of average finish at the current market rate.

Suite 114, comprising 4,000 square feet, is leased to a consumer products manufacturer on a five-year lease with only one year left to run. The lease rate is $21.00 per square foot per year. The current company may or may not stay. Either way, a new five year lease is assumed for renewal purposes.

Suite 205, comprising 5,000 square feet on the second floor, is leased to a temp service on a five year lease with four years left at a rate of $24.00/sq.ft. This space has standard finish and features.

Suite 210, comprising 5,000 square feet on the second floor, is leased to a real estate investment company for five years with four years remaining. This space also has standard finish and features. This lease is at $23.50 per square foot.

Suite 215, comprises 5,000 square feet on the second floor, and it is leased to a soft drink distributor for five years with two years left. This lease is at $22.00 per square foot. This space has standard finish. The tenant is fairly happy in the building but not happy with the configuration of the space. There is a high likelihood the tenant will stay but major expenditures to reconfigure the suite will be needed.