Market Assumptions Flashcards

In ARGUS Enterprise, which field within market leasing assumptions specifies the standard length of new leases for a given tenant category?

Answer: Lease term (months or years)

The lease term field in market leasing assumptions sets the expected duration for new speculative leases in a given tenant category.

If an ARGUS analyst sets a renewal probability of 0% for all tenants, what will the model assume upon every lease expiration?

Answer: All tenants vacate and the space re-leases under market assumptions after a downtime period

A 0% renewal probability means every tenant is assumed to leave at expiration, triggering the downtime and re-leasing assumptions for all spaces.

An ARGUS model for an industrial property uses a market rent assumption of $8.00 PSF NNN with 3% annual growth. What is the projected market rent at the start of year four?

Answer: $8.74 PSF

$8.00 × 1.03³ = $8.00 × 1.0927 ≈ $8.74 PSF after three years of 3% compounded growth.

Which of the following best explains why an analyst might set different market rent growth rates for different lease spaces within the same ARGUS model?

Answer: Sub-markets or tenant categories may have distinct supply/demand dynamics warranting different rent growth forecasts

Different space types or sub-markets within a property may face distinct competitive conditions, justifying varied rent growth assumptions.

In ARGUS, the 'market leasing profile' assigned to a space determines all of the following EXCEPT:

Answer: The current tenant's historical rent payment record

A tenant's historical payment record is not part of market leasing assumptions; it pertains to underwriting credit risk outside the ARGUS model.

When would an ARGUS analyst typically set a higher tenant improvement allowance in market leasing assumptions for a second-generation space compared to a first-generation space?

Answer: When the existing build-out is outdated or requires significant reconfiguration for a new tenant

Second-generation space with outdated finishes or poor layout may require substantial renovation, justifying a higher TI allowance assumption.

An analyst wants to model a scenario where market conditions improve and tenants need fewer concessions. Which combination of market assumption changes reflects this improvement?

Answer: Decrease free rent months and decrease tenant improvement allowance

In a stronger market, landlords offer less free rent and smaller TI packages, so reducing both concession inputs reflects improved conditions.