Weighted Average Lease Expiry (WALE) is a fundamental factor in the pricing of commercial property. A long WALE reduces income risk and is typically reflected in an asset’s lower yield, but what do investors pay for a longer WALE?

To answer this question we’ve modelled 9,900 scenarios in discounted cash flows (DCF) incorporating CBRE’s historical office data from six capital city markets. Using a 5-year WALE as a benchmark, our modelling indicates that the same prime grade asset with a 12-year WALE would require a 14% discount to the capitalisation rate (termed yield herein) to achieve the same internal rate of return (IRR). This discount is consistent amongst the ‘shapes’ of expiry profiles tested, but for shorter WALEs the dispersion of expiry around the WALE can dramatically impact the size of the discount / premium to yield.