Valuation of flexible leases for corporate tenants facing uncertainty in their required work space

Abstract

A valuation approach is presented to price flexible leases with expansion, contraction, and/or cancelation options from the corporate tenant perspective. This model uses the real option valuation approach and determines the flexibility value or the option premium of a lease. This premium is the maximum amount of money that the tenant is willing to invest in incorporating a specific flexible feature in the leasing arrangement. Our model considers uncertainty in the rental market, as well as uncertainty about the firm's required workspace in an integrated valuation framework. Santruka Pristatomas vertinimo metodas, kaip iš komercinio nuomininko perspektyvos ikainoti lanksčiaja nuoma su galimybe didinti arba mažinti plota ir (arba) atsisakyti nuomos. Šiame modelyje, taikant realiu pasirinkimo sandoriu vertinimo metoda, nustatoma nuomos lankstumo verte arba priemoka už galimybe rinktis. Ši priemoka ‐ tai maksimali pinigu suma, kuria nuomininkas pasiruošes investuoti, idant i nuomos susitarima galetu itraukti konkretu punkta del lankstumo. Mūsu modelyje i nuomos rinkos netikruma ir i netikruma del imonei reikiamo darbo ploto atsižvelgiama taikant kompleksine vertinimo sistema. First Published Online: 18 Oct 2010

Keywords

• Real options analysis
• Pricing flexible leases
• Uncertainty about the required workspace
• Dynamic uncertainty of leasing market
• Financial risk analysis