The weighted average lease term (WALT) is the average unexpired length of the leases in a property or portfolio, weighted by each tenant’s share of rental income and expressed in years. It measures how long the rental income is contractually secured, and it is one of the first figures an investor, valuer or lender checks when pricing an industrial or logistics asset. A longer WALT usually means more predictable income and a lower perceived risk.
How the weighted average lease term is calculated
WALT is not a simple average of lease lengths. Each lease’s remaining term is weighted by its share of total rent, so a large tenant on a long lease counts for far more than a small tenant on a short one. The remaining terms are multiplied by their rent weights and then added together.
Take a logistics park with two tenants. Tenant A provides 60% of the rent with six years left to run; Tenant B provides 40% with two years left. The WALT is (0.6 × 6) + (0.4 × 2) = 4.4 years, even though the simple average of the two terms is four years. Weighting by income, rather than by floor area or number of units, is what makes the measure useful.
Two versions are commonly quoted. WALT to expiry runs each lease to its contractual end date. WALT to break runs each lease only to the next tenant break option, and is therefore the more conservative figure. A wide gap between the two is a warning: the income looks secure on paper but could shorten sharply if tenants exercise their breaks.
Why WALT matters to investors and lenders
WALT is a proxy for income security. A building let to strong tenants on long leases delivers a predictable cash flow, which lowers its risk and typically supports a keener cap rate and a higher price for a given net operating income. The same building on short, soon-to-expire leases carries reletting risk, void periods and incentive costs, and buyers price that uncertainty in.
Lenders read it the same way. A loan is more comfortable when the income servicing it is contracted well beyond the loan term. A WALT shorter than the debt maturity is a red flag, because leases may roll before the loan is repaid. This is why owners actively manage WALT, renewing and re-gearing leases early to stop it drifting down as expiries approach. In practice a small difference can move pricing materially: on a keenly bid logistics asset, adding a couple of years of secured income through an early renewal is often worth more to the owner than the rent conceded to achieve it.
WALT across logistics asset types
Different logistics assets sit at different points on the scale. A single-tenant build-to-suit facility is usually let for seven to ten years or more, because the landlord finances a bespoke building against that commitment, so it starts life with a long WALT. A multi-let speculative development, leased to several tenants on three-to-five-year terms, carries a shorter WALT but spreads its risk across more occupiers.
WALT is a moving number. It falls a little every day as leases run down, then jumps when a new letting or a renewal adds term. At portfolio level, owners track the weighted figure across every asset and study the profile of expiries by year, because a cluster of leases ending in the same period concentrates reletting risk regardless of what the headline WALT suggests.
What WALT means for occupiers
WALT is usually discussed from the owner’s side, but occupiers can use it as a negotiating tool. Because landlords and their investors value a longer WALT, a tenant willing to commit to a longer term, or to remove or push back a break option, is handing the landlord something with real balance-sheet value. In a softer market that can be traded for concessions: rent-free months, a fit-out contribution, or a cap on indexation.
The reverse also holds. A tenant who needs flexibility should expect to pay for it, since break options and shorter terms reduce the landlord’s WALT and therefore the value of the asset. Knowing how much your signature is worth to the other side is often the difference between a good deal and an average one, which matters especially in the current tenant-side Slovak market, where vacancy is high and owners are competing for covenant.
Frequently Asked Questions
What is a good WALT for a logistics asset?
There is no single benchmark, but institutional buyers of logistics assets typically look for a WALT of at least three to five years, and single-tenant build-to-suit investments are often underwritten at seven to ten years or more. What counts as good also depends on tenant quality: a shorter WALT to a very strong covenant can be worth more than a longer one to a weak tenant.
Is WALT calculated to break or to expiry?
Both figures are used, and a well-prepared investment quotes each separately. WALT to expiry runs every lease to its final date; WALT to break stops at the next tenant break option and is the more conservative measure. When only one number is given, it is prudent to ask which basis it uses before relying on it.
How is WALT different from the average lease length?
A simple average treats every lease equally. WALT weights each lease by its share of rental income, so the leases that matter most to the cash flow have the most influence on the result. That is why WALT and the arithmetic average of the terms are usually different numbers for the same building.
Why does a longer WALT increase a property’s value?
A longer WALT means the income is secured for longer, which reduces reletting risk, void periods and incentive costs. Lower risk supports a lower cap rate, and a lower cap rate applied to the same net operating income produces a higher capital value. Lenders also lend more comfortably against secure, long-dated income.
Can a tenant use WALT to negotiate a better deal?
Yes. Because owners value a longer WALT, a tenant offering a longer commitment or fewer break options is giving the landlord something with real value. In a competitive or tenant-favourable market this can be exchanged for rent-free periods, fit-out contributions or an indexation cap, which lowers the effective rent over the term.