Computing the vacancy allowance

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A tenant with 10,000 square feet has a lease that is about to expire. With 30% probability, the tenant will vacate the lease. If the tenant vacates the lease, it will take you 7 months to find a new tenant and the new tenant will pay the market rate of $1.25 per square foot per month. If the tenant renews the lease, he will renew at $1.15 per square foot per month. What is potential rent for the year? Use the ARGUS convention for handling vacancy. (Hint: when computing the vacancy allowance that is a component of potential rent, use $1.25 per square foot per month for rent).

Reference no: EM132530959

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