WALE stands for weighted average lease expiry – the average time remaining on a property’s leases, weighted by each tenant’s share of the income. In one number, it tells a buyer how long the property’s income is locked in, which makes it one of the first figures worth checking before you buy a tenanted commercial property.
This guide covers what WALE means, how it’s calculated (with a worked example), and why it matters so much when you are buying.
What WALE stands for and what it means
WALE is short for weighted average lease expiry. It measures how much time is left across all the leases in a property, expressed as a single average in years. The important word is weighted. A simple average would treat a tenant paying most of the rent the same as one paying a fraction of it, which would be misleading. Weighting by income means the tenant contributing the most to your return counts the most towards the number – so WALE reflects the income actually at risk, not just a headcount of leases.How WALE is calculated
WALE is calculated by weighting each tenant’s remaining lease term by their share of the property’s income (or, in some cases, their share of the lettable area), then adding those weighted terms together. Here’s a simple worked example (indicative only):- Tenant A has 6 years left on their lease and pays 70% of the property’s income
- Tenant B has 2 years left and pays 30% of the income
- Weighted: (6 years x 70%) + (2 years x 30%) = 4.2 + 0.6 = a WALE of 4.8 years
Why WALE matters when buying commercial property
WALE is really a measure of income security, and it feeds three things a buyer cares about.- Income certainty. A long WALE means the rent is contracted for years ahead, which is exactly what most commercial investors are buying. A short WALE means leases are rolling off soon and you are closer to having to re-negotiate or re-let.
- Value and yield. Buyers pay more – accept a lower yield – for a property with a long WALE to strong tenants, because the income is more certain. A short WALE typically means a higher yield to compensate for the risk. Our guide to valuing a commercial property covers how income security flows through to value.
- Vacancy risk. A short WALE concentrates the risk that a tenancy ends and the space sits empty, with all the cost that brings. Our guide to commercial property vacancy risk explains how a void hits returns.
What is a good WALE?
There’s no single “good” WALE – it depends on your strategy. A long WALE offers security and predictable income, which suits an investor who wants to buy and hold. A shorter WALE can suit a buyer looking for repositioning or repricing upside, where leases rolling over are an opportunity to lift rents or reposition the asset. What matters as much as the number is the quality behind it. A long WALE to a weak tenant that might not survive the term isn’t the same as a long WALE to a national operator – the years only count if the tenant is good for them.WALE in single-tenant vs multi-tenant assets
WALE behaves differently depending on the property. In a single-tenant asset, WALE is simply that one lease, so the risk is binary – the income is either secured for the term or it’s not. In a multi-tenant property, WALE smooths the risk across several expiries, which is generally steadier, but it pays to look behind the average for a cluster of leases all expiring in the same year, which can create a concentrated vacancy risk the single number hides.Think of WALE as a quick, powerful read on how secure a property’s income is and how much re-letting risk you are buying
It’s one of the first numbers to check on any tenanted commercial property – but always read it alongside the quality of the tenants behind it. If you’re weighing up a commercial purchase in Western Sydney, request a market appraisal or speak to the RWC Western Sydney team about what the WALE and tenant profile really mean for the deal.Some Frequently Asked Questions About WALE
- What does WALE stand for? WALE stands for weighted average lease expiry. It’s the average time remaining across a commercial property’s leases, weighted by each tenant’s share of the income (or floor area), and it shows how long the income is secured.
- How is WALE calculated? Multiply each tenant’s remaining lease term by their share of the property’s income (or area), then add the results together. A tenant with 6 years left on 70% of income and one with 2 years left on 30% gives a WALE of 4.8 years.
- What is a good WALE? It depends on your goal. A long WALE gives income security and suits a buy-and-hold investor; a shorter WALE can offer repositioning upside. The tenant quality behind the number matters as much as the years themselves.
- Does a longer WALE increase a property’s value? Generally, yes. A longer WALE to strong tenants means more certain income, and buyers usually pay more – accept a lower yield – for that certainty. The effect depends on the strength of the tenants underpinning the lease terms.