What is WALT?
WALT stands for Weighted Average Lease Term. It’s a metric used in commercial real estate to measure the average remaining lease duration across a property or portfolio.
Unlike a simple average, WALT accounts for the size or income contribution of each lease. This means larger tenants or higher-paying leases have more influence on the calculation, giving investors a more accurate picture of lease stability.
How does WALT work?
WALT works by weighing each lease’s remaining term based on a specific factor—typically the rental income it generates or the floor area it occupies.
For example, if one tenant pays $100,000 annually with 5 years left and another pays $50,000 with 2 years remaining, the first tenant’s longer term carries more weight in the calculation. This reflects the property’s true income security better than treating both leases equally.
The result is expressed in years, showing how long the property’s income stream is secured on average.
WALT formula
The WALT formula is:
WALT = ? (Lease Term × Weight) / ? Weight
Where the weight is typically either annual rent or leased area.
Alternatively:
WALT = [(Lease Term? × Rent?) + (Lease Term? × Rent?) + … + (Lease Term? × Rent?)] / Total Rent
Or, if using area:
WALT = [(Lease Term? × Area?) + (Lease Term? × Area?) + … + (Lease Term? × Area?)] / Total Area
Real-world application of WALT in real estate
Investors use WALT to assess income risk when evaluating commercial properties. A shopping center with a WALT of 7 years indicates more stable cash flow than one with a WALT of 2 years.
Lenders also review WALT during financing. Properties with longer WALTs typically qualify for better loan terms since the income stream is more predictable.
During acquisitions, buyers compare WALT across similar properties. A office building with a WALT of 8 years may command a premium over one with a WALT of 3 years, even if current income is similar.
How WALT is used
Investors use WALT to compare income stability across different properties or portfolios. It helps identify which assets face near-term lease expiry risk.
Asset managers track WALT over time to monitor portfolio health. A declining WALT signals upcoming lease renewals that require attention and potentially capital investment.
Financial analysts include WALT in valuation models. Properties with higher WALTs often receive lower capitalization rates due to reduced income uncertainty.
WALT in other words
Think of WALT as a weighted countdown timer for your rental income. Instead of simply averaging when leases expire, it tells you how long your most important income sources are locked in.
It’s the difference between knowing “I have three tenants” and knowing “80% of my income is secured for the next 6 years.” WALT gives weight to what matters most—the leases that actually drive your property’s value.
