Lease-up and stabilisation
Absorption, occupancy, NOI, TI and commissions.
By Surojit Chakraverti, founder of L3VLUP and an investor running a long-short healthcare and technology equities strategy.
On this subject: lease-up and stabilisation.Updated 2 October 2026
Part of real estate models, with the models, labs and guides around it.
What it does
From an empty building at completion to a stabilised one. Absorption sets the share of the building let each quarter; rent starts the quarter after a lease is signed; operating costs run from completion whether the space is let or not, so the first quarters lose money; tenant improvements and leasing commissions are spent as space is let. Stabilised NOI, read forward at the point occupancy settles, is what the refinance and the sale are priced on.
Where it lives
The same schedule in each model that carries it, with the rows to open. Open a model in the browser, go to the sheet, and click the lines.
- Assumptions, rows 19–26: Rentable area (thousand sq ft), Absorption: share of the building let in the quarter, Market rent at completion ($ per sq ft a year), Rent growth a year…
- Budget, row 11: Tenant improvements and leasing commissions, as space is let
- Lease-up, rows 6–8: Area let in the quarter (thousand sq ft), Occupied area, end of quarter, Occupancy
- Lease-up, rows 11–16: Market rent with growth ($ per sq ft a year), Rent on space occupied at the start of the quarter, Vacancy and credit loss, Operating costs not recovered (from completion)…
What a reviewer looks for
- Rent from the day a lease is signed.
- Operating costs that start only when the space is let.
- Stabilised NOI read from a quarter still leasing up.
Learn it, then build it
Build · Lab · ~12 min
Rent Roll Underwriting
Turn a rent roll into income, read mark to market and the reversion, price the first lease expiry with downtime and leasing costs probability-weighted, and state the WALT.
Read · Guide · 13 min
Real Estate Financial Modelling: Why Corporate Finance Mechanics Break Here
Vocabulary: Absorption, Stabilisation, Tenant Improvements and Leasing Commissions (TI/LC), Net Operating Income (NOI).