Why one month can cost you 25 basis points

Here's something most owners never price in until they're selling: a net-lease building loses value as the lease term burns off, and it doesn't happen in a straight line. It accelerates.

The curve, roughly

Based on the deals I've watched trade, when remaining term slips from 15 years to 14 years and 11 months, one month, an owner tends to lose somewhere around 20 to 25 basis points of cap-rate value. Same building, same rent, one less month of contractual income, but the market perceives more risk and demands a higher cap.

It gets steeper

• From 15 years to about 14, the bleed is gentle, a few basis points here and there.
• From 10 years to 9, you can lose 40 to 50 basis points.
• From 5 years to 4, the spread can be over 100 basis points.

The closer the lease gets to expiration, the faster value drops, because the building starts to look less like a bond and more like an empty box you'll have to re-tenant. Fourteen years reads as "long and safe." Four years reads as "here comes a vacancy."

The practical takeaway: term is not a detail, it's a clock, and the best time to act is usually earlier than it feels. If you're holding a shortening lease, the question isn't "should I ever sell," it's "am I on the flat part of the curve or the steep part?" The analyzer shows you exactly where you sit in about a minute, and the full mechanics, including how escalations and guarantees change the picture, are in the Handbook.