Rollover Risk: How to Model the Year Your Building's Leases All Expire at Once

A single lease expiring is a leasing event. Every lease expiring in the same year is a solvency event. Rollover risk is the difference between the two, and it is the risk most rent rolls are built to hide. A property that looks fully occupied and safely cash-flowing can carry a concealed cliff: a single year in which 40, 60, or 90 percent of its income comes up for renewal at once, exposing the owner to simultaneous downtime, concessions, capital, and repricing across the whole rent roll. Rollover risk is not whether leases expire. They always do. It is whether they expire together. Concentration, not expiration, is the danger.

The thesis: rollover risk is a concentration problem, and the only way to see it is to model the timing of expirations, not the level of occupancy. A lease expiration schedule turns an invisible cliff into a number you can underwrite.

Key Takeaways

• Rollover risk is the danger that too large a share of a property's leased space or income expires in a single period, forcing simultaneous re-leasing rather than staggered turnover. Concentration is the risk, not expiration itself.

• A lease expiration schedule, which arrays expiring square footage and rent by year, is the primary tool for exposing a rollover cliff. Smooth expirations are manageable; a spike in one year is not.

• More than 500 million square feet of office and mixed-use net rentable area secured by CMBS loans is scheduled to expire over five years, with roughly 217 million square feet of near-term rollover across 2024 and 2025, per CRED iQ.

• The cost of a rollover year is the stack of re-leasing costs hitting at once: downtime, tenant improvement allowances, leasing commissions of 4 to 6 percent on new leases, and any gap between expiring and market rent.

• A building can pass every present-tense test, occupancy, NOI, and DSCR, and still be one expiration cycle from crisis. Only the expiration schedule reveals it.

What is rollover risk in commercial real estate?

Rollover risk is the exposure a property faces when a significant portion of its leases expire in the same period, concentrating the downtime, releasing costs, and rent repricing of many tenants into a single year. It is one of the most important leasing risk metrics because it measures how much income must be renewed, replaced, or repriced at once, rather than gradually over a hold.

The word that matters is concentration. Leases always roll; that is normal turnover. Rollover risk is the pathological version, where the turnover clusters. CRE Wisdoms frames it directly: if only a small amount of rent expires each year, rollover risk is manageable, but a major concentration of rent expiring in one year makes the risk far higher. A property where 25 percent of office leases or 30 percent of retail leases expire in the same year, in CRE Wisdoms' framing, has created concentrated re-leasing risk that a staggered schedule would not carry.

Anchor tenants sharpen the danger. When a single large lease rolls, it can trigger a co-tenancy cascade, put a CMBS loan on a servicer watchlist, and pull occupancy below covenant thresholds all at once. See the anchor-tenant and vacancy-rate glossary entries for how a single expiration can ripple across a rent roll.

How do you build a lease expiration schedule to expose the cliff?

A lease expiration schedule is a table that arrays each tenant's expiring square footage and expiring annual rent by the year the lease ends, then totals each year as a percentage of the property. It exposes the cliff by making concentration visible: a year that holds a disproportionate share of rent or area is a rollover year, and the schedule is what turns that from a surprise into a plan.

The construction is mechanical. Pull each lease's expiration date and annual rent from the rent roll, bucket them by calendar year, and express each year's expiring rent as a share of total in-place rent. A representative ten-tenant office building shows the pattern.

The schedule makes the problem undeniable. This building is fully occupied and cash-flowing, and 60 percent of its income expires in Year 3. Nothing in the occupancy figure or the current NOI shows that. Only the schedule does. Adventures in CRE describes exactly this workflow: identify each tenant's expiration, then aggregate the expiring square footage or gross income in each year of the hold to quantify the exposure year by year.

The expert-voice line worth keeping: a rent roll tells you who pays you today, but only the expiration schedule tells you which year the building could go dark. This is why a low weighted average lease term that also happens to be concentrated is doubly dangerous: short runway and a cliff at the end of it.

How do you model the cash flow impact of a rollover year?

You model a rollover year by simulating what happens to each expiring lease when it rolls: apply a renewal probability, and for the space that does not renew, layer in downtime, a tenant improvement allowance, a leasing commission, and a reset to market rent. Aggregating those effects across the concentrated year quantifies the NOI hit the schedule warns about.

The standard approach, as Adventures in CRE and PropertyMetrics describe it, uses market leasing assumptions applied lease by lease. For the Year 3 cliff above, with 1,500,000 dollars of rent rolling, model the following on the expiring space.

The inputs are representative ranges drawn from market convention: CRE Wisdoms and market reporting place new-lease commissions at 4 to 6 percent and renewal commissions at 1 to 2 percent, and re-leasing downtime commonly runs 6 to 12 months for mid-size office space. The output is a single-year drawdown in net operating income and a spike in capital spending that no annual pro forma with steady rent growth would ever surface. Modeling the switch to market rent at expiration, as Edward Bodmer describes for a basic lease-roll analysis, is what converts a static rent roll into a forecast that respects the cliff.

The scale is not hypothetical. CRED iQ reports more than 500 million square feet of office and mixed-use net rentable area securing CMBS loans is scheduled to expire over five years, with roughly 217 million square feet rolling across 2024 and 2025, and the New York region alone carrying more than 173 million square feet of expirations through 2028. Concentrated rollover is a market-wide condition, not an edge case, and a loan can land on a servicer watchlist the moment an anchor lease rolls into it. The discounted-cash-flow model that ignores the timing of these expirations is a model that misprices the asset.

Frequently Asked Questions

What is a rollover cliff in commercial real estate?

A rollover cliff is a single year in which a disproportionate share of a property's leases expire at once, concentrating re-leasing risk that would otherwise be spread across many years. A building can look fully occupied and healthy on current metrics while carrying a cliff where 40 percent or more of its income comes up for renewal simultaneously, which only a lease expiration schedule reveals.

How much lease rollover is too much in a single year?

There is no universal threshold, but market framing treats a concentration of 25 to 30 percent or more of leases expiring in one year as elevated re-leasing risk, per CRE Wisdoms. The more useful test is relative: staggered expirations of roughly equal size each year are manageable, while any single year holding a large multiple of the others signals a cliff that needs to be modeled explicitly.

How do you reduce rollover risk in a portfolio?

Rollover risk is reduced by staggering lease expirations so no single year concentrates too much income, negotiating renewals early, blending and extending strong tenants before their leases roll, and spreading expirations across tenants of different sizes and credit. The goal is to convert a cliff into a gentle slope, turning one solvency event into a series of manageable leasing events.

Conclusion

Rollover risk is the risk of timing, not of turnover. Every lease expires; the question is whether they expire together, and a rent roll organized by tenant will never answer it. Only a lease expiration schedule, arrayed by year and read as a percentage of income, exposes the year the building could go dark. Model that year the way it will arrive, with renewal probability, downtime, TI, commissions, and a rent reset all landing at once, and the concealed cliff becomes a number you can price, finance, and manage against. For the operator, the discipline is to underwrite the shape of the expirations, not just the level of occupancy. A full building with a cliff in Year 3 is not a stable asset. It is a countdown, and the schedule tells you how much time is left.

Related Reading

• Why Weighted Average Lease Term Is the Best Single Proxy for Cash Flow Durability

• Critical Dates Tracking Belongs Inside the Stacking Plan, Not Beside It

• Physical Occupancy Says the Building Is Full. Economic Occupancy Says Whether It Pays.

• Property Insurance Is the Operating Expense That Reprices Faster Than Rent

• The Abstraction Backlog: Why Lease Data Falls Behind and How to Catch Up