Industrial leasing - what kind of premium do you place on a 10 year term vs a 5 year term from an NER perspective? NNN.
When comparing term options for a particular tenant, how do you determine how much higher an NER should be for a longer term option?

Tenant requests multiple term options for a space. The improvement package is the same for both term options. How do you compare NER for deals of different lengths? How much higher should a 10 year NER be than a 5 year?
[{"id": "hyy3a4y", "text": "I don't really understand the question.  Have you calculated NER on both options?  Did you use the same discount rate?  You could slightly adjust that for the longer term.  Are there increases in the second 5 years?  \n\nYou basically offer the same NER or a slightly discount to the NER for 10 years typically (ie I might discount the NPV on the 10 a touch as there are softcosts in leasing and longer term can decrease cap a bit to offer other valuation gains).  The TI/concessions will tend to make the 10 year option much less in a gross way.", "replies": [{"id": "i1tarnq", "text": "Yes. An NER has been calculated on both options. The improvement package would be the same in both scenarios.\n\nSay you have a 5 year NER for 10,000 SF at $10.00 flat with a $15.00 TI and no free rent. That creates an NER of $5.53. \n\nIf I want a 10 year deal with the same incentives to produce the same NER that would be the equivalent of a flat rent of $8.40 over 10 years. \n\nAre you saying you\u2019d be indifferent between offering a 5 year deal at $10.00 vs a 10 year deal at $8.40?\n\nThanks for your response I appreciate you taking the time to help me try to figure this out.", "replies": [], "depth": 2}], "depth": 1}]