How Weighted Average Lease Expiry Changes a Commercial Loan
Commercial Property Finance
WALE · Lease expiry · Vacancy · Commercial lending
WALE is where lease timing meets loan timing. A buyer or owner needs to know not only the average term left, but which tenant carries the rent, when the firm term actually ends, whether options count, what the valuer may be instructed to assume, and what happens if refinance or a facility review arrives before the tenant renews. This guide follows that customer journey from due diligence to lease expiry, vacancy and the next finance decision.
Quick Answer
WALE is the average remaining lease term across a commercial property, weighted by rent or floor area. On rent-supported lending, a short firm lease can affect loan term, valuation and refinance appetite. There is no national minimum WALE, but individual lender products can impose their own lease-expiry rules.
Also called: WALT (weighted average lease term) and WAULT (weighted average unexpired lease term).
What does WALE measure, and what does it not tell a lender?
Weighted average lease expiry measures one thing: the average time left to run on the leases over a property, weighted either by the income each lease produces or by the floor area it occupies. It is a single number describing a schedule, and the schedule is what a credit team reads. An average hides a distribution, and on a tenanted commercial property the distribution is the risk. The industry's own definition confirms both weightings: the Glossary of Property Terms, published jointly by the Property Council of Australia, the Australian Property Institute and the Real Estate Institute of Australia, defines the weighted average lease term as the term remaining to expire across a portfolio, weighted by rental income or by square metres. It does not say whether options or break clauses are counted, which is why any figure you are shown needs its method stated.
The two weightings are not interchangeable and they routinely disagree on the same building. Weighting by income asks how much of the rent roll is contracted, and for how long. Weighting by area asks how much of the floor plate is committed. A property whose biggest rent payer is on the shortest lease reads well by area and badly by income. A property whose largest tenancy by floor space pays the least reads the other way. The worked example in the next section runs both methods across the same three tenancies.
The second limitation is subtler. A WALE of four years can be one lease with four years to run, or eight leases expiring in a staircase across seven years. Those are different properties. The first has a single cliff and a single counterparty; the second has a spread of small re-letting events and no year in which the income disappears. A lender treats them differently even though the headline number is identical, and the reason is concentration rather than duration. Tenant quality sits alongside this rather than inside it, and it is covered separately in how your tenant sets your LVR.
What WALE does not measure at all is whether the rent continues after expiry. It is a measure of contracted term, not of renewal probability, and no weighting of it will tell you whether a tenant intends to stay. Valuers treat renewal as a separate input: the same joint glossary defines a retention rate as the factor applied in a discounted cash flow to reflect the probability of tenants renewing or exercising options. That is the gap this guide is about, and it is the gap that matters once the lease clock and the commercial property loan clock start running against each other. Where the loan is structured interest only, there is a third clock, and our note on how a lender reads a lease covers what tends to get asked for at the file level.
How do you calculate WALE by income and by area?
Multiply each lease's remaining term in years by that lease's share of the total, then add the results. For WALE by income, the share is the lease's portion of total contracted rent. For WALE by area, it is the lease's portion of total lettable area. Written as a formula, WALE equals the sum of (remaining lease term x share of income or area) across every lease, and the answer is in years.
Run both methods on the same three tenancies and the gap between them is plain.
Scroll the table sideways to see every column.
| Tenancy | Years left on lease | Share of income | Years x income share | Share of area | Years x area share |
|---|---|---|---|---|---|
| Tenancy A | 1 | 60 per cent | 0.60 | 25 per cent | 0.25 |
| Tenancy B | 5 | 30 per cent | 1.50 | 35 per cent | 1.75 |
| Tenancy C | 8 | 10 per cent | 0.80 | 40 per cent | 3.20 |
| WALE (sum of the column) | Not summed | 100 per cent | 2.9 years | 100 per cent | 5.2 years |
The two figures above describe one property. Same tenants, same leases, same day, 2.9 years or 5.2 years depending on which weighting the report used. Read by area, the building looks like a five year hold while 60 per cent of the rent is on a one year clock. That is why a WALE quoted without its basis is close to meaningless, and why the first question worth asking about any WALE figure is whether it was struck on income or on area. What a lender asks for alongside either figure is the expiry schedule lease by lease, showing the income and the lettable area of each tenancy, so both readings can be checked.
WALE calculator: your own tenancies
Enter the years left, annual rent and lettable area for each tenancy. Leave unused rows blank. Everything is worked out in your browser and nothing you type is sent anywhere.
WALE by income: enter years and rent above
WALE by area: enter years and area above
Illustrative arithmetic only. It runs each lease to the expiry you enter, so enter the earliest date a tenant can leave if you want the cautious reading. It is not a valuation and not an indication of what any lender will do.
Do lease options and break clauses count in WALE?
There is no single published convention that makes an unexercised option part of WALE, so the calculation needs to say what date it uses. The Property Council, Australian Property Institute and Real Estate Institute glossary defines the weighted term remaining by income or area but does not settle options or break rights. For a cautious credit reading, use the earliest date each tenant can leave unless the lender or valuer tells you otherwise. That distinction is real in lending: one current Australian bank Lease Doc product, checked 21 September 2026, expressly bases the maximum loan term on the remaining lease term excluding options, while other bank Lease Doc products count options. That is a product rule, not a national WALE rule.
What is a good WALE?
There is no published Australian benchmark for a good WALE, and no instrument found in this research sets one. The test a bank is required to apply is relative rather than absolute: APRA's APG 112 frames it as assessing the tenancy profile against the maturity of the loan and, where there are several tenants, whether the WALE sufficiently exceeds loan maturity. So a WALE is best read against your own loan term and alongside how concentrated the income is, not against a market rule of thumb. The instrument itself is covered in the next section.
What should you check first, depending on your situation?
Start with the next decision date, not with the WALE figure. For a buyer that may be exchange or settlement; for an owner it may be a scheduled facility review, interest-only expiry, refinance or lease-notice deadline; and if the tenant has already gone it may simply be the next repayment the rent was meant to support. The table follows the five situations that usually send a borrower searching for WALE in the first place.
Scroll the table sideways to see every column.
| Your situation | The first thing to check | Why it matters | Read next |
|---|---|---|---|
| Buying a tenanted property and the sales material quotes a WALE | Whether the figure is by income or by area, and the expiry schedule lease by lease, including options and break clauses. | The same building can read 2.9 years or 5.2 years depending on the basis, and a lender reads the schedule, not the average. | How to calculate WALE and buying with an existing tenant. |
| You own it and a lease expires in the next 12 to 24 months | The order of four dates: lease expiry, the next scheduled facility review or renewal, end of any interest only period, and loan maturity. | The finance event can arrive before the expiry, so that is where the question may be asked first. | When the lease ends before the loan. |
| Your tenant has given notice or has already left | The reporting, default and enforcement clauses in your facility agreement, and which kind of lender you have. | Notice periods and complaint routes depend on who the lender is, not on the lease. | What protection you have and vacant commercial property finance. |
| Your own business occupies the property | How the lender and the valuer will treat a lease to your own business. | Owner-occupied property is generally valued on a vacant possession basis, so the lease term may carry less weight than you expect. | If your own business is the tenant. |
| Refinancing or selling in the next year | Whether the lease position can be settled before the valuation is ordered. | A valuation ordered before a renewal is signed may have to be done again. | The practitioner notes on order. |
What should you ask before exchange if the property has a short WALE?
Before you become committed to the purchase, turn the WALE into six questions that a lender or valuer can actually answer. This is more useful than asking whether the headline number is "good".
Before exchange, ask these six questions
- What is the WALE basis? Income, leased area or total lettable area?
- What is the firm term? For each tenancy, identify current expiry, the earliest break date and any option that has not yet been exercised.
- Where is the concentration? Which tenant contributes the most net rent, and when does that tenant's firm term end?
- Which finance path are you relying on? A rent-supported Lease Doc assessment is more exposed to a short firm term than a full-doc or owner-occupied assessment supported by other income.
- What valuation basis could apply? Ask what happens if the lease becomes an imminent expiry before valuation or settlement.
- Which date arrives first? Settlement, lease expiry, facility review or renewal, interest-only expiry, or loan maturity?
If one of those answers is unknown, make it a due-diligence item before the finance clause or settlement timetable removes your room to fix it. The related acquisition checklist is in buying a commercial property with an existing tenant.
What if your own business is the tenant?
Many business owners hold their premises in a separate entity, such as a family trust or a company, and lease it to their own trading business. Two sources point the same way. ANZVGP 112 says owner-occupied property should be valued on a vacant possession basis unless the valuer is instructed otherwise, so where a lender treats a lease to your own business as owner occupation, the lease term may add little to the value. And APRA's draft APG 112 gives, as its example of commercial property that is not dependent on property cash flow, an SME loan secured by commercial property but serviced from business revenue, which places the credit question on the trading business rather than on the lease. The difference between the two structures is covered in passive versus owner-operated commercial property. How a particular lender treats a lease between related entities varies, so ask before relying on a long lease you have, in effect, written to yourself.
Can you use Lease Doc if your own business is the tenant?
Do not assume that a long related-party lease makes the property eligible for Lease Doc lending. One current Australian bank Lease Doc product, checked 21 September 2026, requires an arm's-length lease and says lease income from a related party cannot be used under that pathway. Other lenders and products can use different rules, so the point is not that every related-party lease fails. The point is that an internal lease can be legally real without being treated as independent rental income for a particular credit product. If the property is occupied by your own trading business, prepare for the lender to assess the business cash flow and the property on an owner-occupied or vacant-possession basis rather than relying on the internal rent alone.
Is there an Australian rule for WALE or a short lease on a commercial loan?
There is no national Australian minimum WALE and no national formula that converts WALE into an LVR, margin or maximum loan term. But that is different from saying lease expiry cannot cap a loan. APRA sets the prudential requirement for banks to assess the tenancy profile against loan maturity, while individual lenders can then impose their own product rules, including rules that tie the available term to the remaining firm lease.
Can a lender cap the loan term at the remaining lease term?
Yes, individual lender products can. One current Australian bank Lease Doc product, checked 21 September 2026, publishes a term of up to five years or lease expiry, whichever is shorter. Another current bank Lease Doc product, checked the same day, says the maximum loan term is the lesser of the remaining lease term excluding options or the product's maximum interest-only term. Other bank Lease Doc products run the term to lease expiry including options, so the same lease can support different terms at different lenders. Those are product policies, not legislation or APRA thresholds, and other lenders use different structures. The practical answer is therefore two-part: there is no universal Australian cap, but your chosen product can still have one.
The instrument that names the prudential test is APRA Prudential Practice Guide APG 112. On commercial property exposures that depend on property cash flows, it records that an authorised deposit-taking institution "is required under APS 112 to assess the tenancy profile relative to the maturity of the loan", and that where a property is leased by multiple lessees "an ADI's assessment may consider whether the weighted average lease expiry (WALE) sufficiently exceeds loan maturity". Read that carefully. The obligation is to assess the tenancy profile against loan maturity. WALE appears as something the assessment may consider, with no threshold attached, and the guide is addressed to banks about their own capital treatment rather than to any borrower about their file. Source: APRA, Prudential Practice Guide APG 112 Capital Adequacy: Standardised Approach to Credit Risk, current as at 30 September 2024, read at source 21 September 2026. Prudential guidance to authorised deposit-taking institutions, not binding on non-bank or private lenders and not a rule about any individual application.
Two further points in APRA's material change how this lands on a real file. First, the assessment has a consequence at a bank: APRA's June 2026 consultation draft of APG 112, marked for April 2027, keeps the WALE wording unchanged and notes that for a loan dependent on property cash flow, the tenancy profile must be assessed against the loan's maturity or the exposure is non-standard. In the risk weight summary in that draft, a standard loan of this kind carries a 70, 90 or 110 per cent risk weight depending on LVR, and a non-standard one carries 150 per cent. That is capital the bank must hold, not a rate or an outcome for you, but it explains why a bank asks the question at all. Second, the test is aimed at investment property. The same draft gives, as its example of commercial property not dependent on property cash flow, an SME loan secured by commercial property but serviced from business revenue, which is the typical owner-occupier. Draft read at source 21 September 2026; a consultation draft, not yet in force.
One disambiguation before going further, because the search results confuse the two. A short lease term granted to a tenant is not a short leasehold title. The first is how long your tenant is committed for on a property you own. The second is how long your own interest in the land has to run, which is a tenure question and a different lending conversation entirely. Ask a search engine about a short lease and a mortgage and it will happily mix residential leasehold title results into an answer about commercial tenancy risk. If your question is about your own tenure rather than your tenant, start at leasehold, not here.
Can a short lease change the valuation basis?
Yes. On the valuation side, the profession's guidance is narrower than the market assumes. ANZVGP 112, the Australian and New Zealand guidance paper on valuations for mortgage and loan security purposes, effective 1 January 2025, says at section 5.3 that owner-occupied property "should be valued on a vacant possession basis (unless otherwise instructed)", that "an estimated marketing period should be provided", and, in the sentence closest to a short-lease treatment anywhere in Australian professional guidance, that "some lenders may ask for a vacant possession value where a property is subject to a lease with an imminent expiry and the value of a property on a vacant possession basis is, or is likely to be, significantly different from the value of the property subject to the existing lease". Read at source 21 September 2026. That is one sentence about an instruction a lender may give, not a valuation method and not a discount, and it is professional guidance to valuer members rather than a lender rule. Individual lender panel instructions vary.
Is an estimated marketing period the same as a letting-up period?
No. The estimated marketing period is worth separating out, because it is the term most often misread. It is the valuer's estimate of the time a sale would take. It is not a lender's grace period and it is not a letting-up period. Nothing in the guidance paper converts one into the other, and treating a marketing period as though it told you how long a tenancy would take to re-let is a category error. Our note on what a valuer does with a property under contract covers the adjacent point about instruction and basis, and valuation sets out the terms.
Scroll the table sideways to see every column.
| Instrument | What it names | What it does not name | What that means for a borrower |
|---|---|---|---|
| ANZVGP 112, effective 1 January 2025. Valuation guidance for mortgage and loan security purposes, Australian Property Institute with the New Zealand bodies | The vacant possession basis for owner-occupied property, the estimated marketing period, and the vacant possession instruction where a lease has an imminent expiry. | No letting-up allowance, no vacancy allowance, no short-lease discount, no WALE and no tenant covenant. None of those terms appears in the document. | An imminent expiry can change the basis your valuation is instructed on. It does not trigger a published discount, because no published discount exists to trigger. |
| AVGP 301 version 2.0, effective 1 July 2023. The profession's guidance on rental valuations and advice | Face rent, effective rent, and a cash flow method for valuing an incentive with and without it. | No letting-up allowance and no vacancy allowance. Neither term appears in the document. | The profession has defined how to value the incentive, and has not defined how to value the empty months around it. |
| APG 112, current as at 30 September 2024. APRA guidance to banks on the standardised approach to credit risk | Segmentation of commercial property by dependence on property cash flows, the requirement under APS 112 to assess the tenancy profile relative to loan maturity, and WALE as something the assessment may consider. | No WALE threshold, no minimum, no LVR or loan term consequence, and no interest coverage ratio for commercial real estate. Neither "interest cover" nor "ICR" appears in the document. | Your lease profile is assessed against your loan maturity at a bank because a prudential standard requires it, and an investment loan that fails the assessment is treated as non-standard, with a higher capital charge for the bank. The lending outcome that follows is the bank's judgement, not a published figure. A June 2026 consultation draft keeps the same wording. |
| APRA letter to ADIs, 7 March 2017, marked Current. Supervisory letter to banks on commercial property lending | Interest cover ratio, debt yield and loan to value ratio as debt sizing measures, and a concern that minimum ICRs were not adjusted as rates fell. | Tenant risk, lease risk, lease expiry and WALE. None of those terms appears in the letter. | The measures APRA wrote to banks about are income and leverage measures. The lease profile sits behind the income, and the letter does not reach it. APRA's February 2025 clarification of the letter says its credit risk requirements for commercial property lending sit in APS 220 and APG 220. |
Two of those rows are measured statements about two named documents, and they should be read as exactly that. ANZVGP 112 and AVGP 301 do not define a letting-up allowance or a vacancy allowance. That is not the same claim as "no Australian source addresses it", and it is emphatically not the claim that valuers do not apply a vacancy allowance. Valuers plainly do. The finding is that the practice is not defined in the profession's published guidance papers, which is why two valuations of the same building can treat the same empty months differently and both be defensible. Where a building has no tenant and no income at all, the conversation changes shape entirely and is covered in vacant commercial property finance.
The practical consequence is that a short lease changes different finance paths in different ways. There is still no Australian document you can point at that says a given WALE buys a given loan to value ratio. The more useful question is which source of repayment and which security value your proposed facility relies on.
Scroll the table sideways to see every column.
| Finance path | What carries the assessment | What a short lease can change | What to prepare next |
|---|---|---|---|
| Rent-supported or Lease Doc investment | The contracted rent, tenant and firm lease term do most of the serviceability work. | The firm term can narrow eligibility or cap the available product term, and unexercised options may or may not count, depending on the product. | Executed lease and variations, tenancy schedule, net rent, expiry and break dates, and renewal evidence. |
| Full-doc commercial investment | Property rent can be combined with other accepted borrower or business income, depending on policy. | The lease can still affect valuation, tenant concentration and the term a lender is comfortable with even where other income services the debt. | Current financials plus the full lease pack and valuation evidence. |
| Owner-occupied commercial property | The trading business is usually the repayment source rather than an external tenant. | WALE may matter much less, while vacant-possession value and business serviceability matter more. | Business financials, current debt position and the property's alternative-use evidence. |
| Specialist non-bank or private finance | Assessment can be more asset-led or exit-led, depending on the facility. | A short lease or vacancy may be workable, but the term, covenants, valuation rights, exit costs and dispute route need closer reading. | A written re-letting, sale or refinance exit and a solicitor's review of the facility terms. |
What happens when a commercial lease ends before the loan does?
There is no universal loan consequence that applies merely because a commercial lease expires. The effect depends on the facility agreement, the source of repayment and the next contractual event, such as a scheduled review or renewal, covenant test, interest-only expiry or loan maturity.
There are at least two clocks on a tenanted commercial property and they are rarely set to the same time. One is the lease. The other is the finance facility, which may have a maturity date, review or renewal date, covenant testing dates and an interest-only expiry. A third clock can come from retail-leasing law. Put those dates on one line before you decide what to do next.
Start with the order of the dates. Write down the lease expiry, any tenant notice or option deadline, the next facility review or renewal, the end of any interest-only period and loan maturity. That converts a vague short-WALE problem into a sequence with a first decision. The prudential layer works the same way round: on property-cash-flow-dependent lending, a bank must assess the tenancy profile relative to loan maturity.
Does every commercial property loan have an annual review?
No. Commercial facilities do not all have the same review cycle. One current Australian Lease Documentation product sheet, checked 21 September 2026, states that reviews occur every one to five years depending on security type and total lending limits, while another current Lease Doc product publishes no annual reviews or valuations. Your facility agreement, not the phrase "commercial loan", tells you when your own review or renewal occurs. If a review is scheduled, an expiry inside the next period is a known future change to income, so the useful question is whether the position is resolved, visibly in progress or still unanswered. Covenant mechanics and interest-only expiry are separate facility events, covered in covenant breach and interest-only expiry and commercial interest-only expiry, and the definitions sit in loan covenant.
What if the tenant stays after expiry on holdover?
Holdover deserves a mention because it is so often treated as a solution. When a lease runs past its term and the tenant stays on, the tenancy usually continues on some form of periodic or holdover basis. The rent may keep arriving. What has gone is the contracted term, and a tenancy terminable at short notice is a weaker income for security purposes than the same tenant on a fresh five year lease, even though the bank statement looks identical. Holdover buys time. It does not restore the term. The joint industry glossary describes holding over as a tenant staying on after expiry, usually month to month, on the terms of the original lease.
Can you refinance a commercial property before the tenant renews?
Yes, a short lease does not automatically prevent refinance, but it changes the case you need to present. A rent-supported product may be constrained by the remaining firm lease term, while a full-doc assessment may be able to rely on other accepted income and an owner-occupied loan may be serviced from the trading business. If the tenant intends to stay, an executed renewal is stronger evidence than an email saying negotiations are positive. If renewal is uncertain, prepare the alternative case as well: current market rent, the leasing campaign, likely incentives, vacancy assumptions, other servicing income and the amount of debt the property can still support if the valuation basis changes. The adjacent pathway is covered in vacant commercial property finance.
What proof of a tenant renewal actually helps before refinance?
The useful distinction is between evidence of intent and evidence of a new firm term. An executed renewal, new lease or deed that fixes the next term gives the clearest contractual evidence. A validly exercised option can also be important because, where the lease requirements are satisfied, it can bind the parties to the further term. A signed heads of agreement or letter of intent can show that negotiations are advanced, but its legal effect depends on its wording and it should not be treated as automatically equivalent to an executed lease. Emails saying the tenant is likely to stay are useful context, not a new contracted term. Have your solicitor confirm the legal effect of any renewal document before asking a lender or valuer to rely on it.
Scroll the table sideways to see every column.
| Evidence | What it shows | How to present it |
|---|---|---|
| Executed renewal, new lease or deed of variation | A documented next firm term and the rent or other terms that apply. | Provide the executed document with the existing lease and every prior variation. |
| Validly exercised option | The tenant has exercised a contractual right to a further term, subject to the lease and applicable law. | Provide the option clause, exercise notice, proof of service and any document recording the renewed rent or term. Queensland guidance is one jurisdictional example of why correct exercise matters. |
| Signed heads of agreement or letter of intent | Negotiations may be advanced, but the document's legal effect depends on its wording. | Provide it as evidence of progress, not as a substitute for legal advice on whether a new lease is binding. |
| Emails or verbal intention to stay | Useful context about negotiations, but no new firm lease term by itself. | Pair it with a timetable to formalise the renewal and an alternative re-letting plan. |
What if the tenant surrenders early or assigns the lease to someone else?
An early surrender and an assignment are different credit events. A surrender ends the existing tenancy before its scheduled expiry and removes the contracted income unless a replacement lease starts at the same time. An assignment keeps the lease on foot but substitutes a new tenant, so the remaining term may survive while the tenant covenant changes. That can matter to a lender or valuer because the person or business now responsible for the rent may be financially stronger or weaker than the outgoing tenant.
The legal process is lease and jurisdiction specific. As one Australian example, the NSW Small Business Commissioner says an early surrender is usually documented formally and notes that an assignment can require the property owner and mortgagee to approve the incoming tenant. Its separate assignment guidance asks for evidence of the proposed tenant's financial standing and business experience in the retail-lease process. For a loan file, the practical step is to check the facility agreement before consenting to a surrender or assignment, then give the lender the proposed deed, incoming tenant details, financial standing information and the revised rent and expiry schedule if the facility requires notification or consent.
What documents should you have ready before a facility review or refinance?
Bring the documents that answer the lease question before credit has to ask for them: the executed lease, every variation and option notice, a tenancy schedule showing rent and expiry by tenancy, evidence of rent actually received, any renewal or re-letting correspondence, the current facility statement, and the dates for review or renewal, interest-only expiry and maturity. If the tenant may leave, add a written leasing-agent view on market rent, incentives and recent comparable letting times. That pack lets the lender distinguish a short lease with a plan from a short lease with an unknown outcome.
There is one statutory clock that most finance conversations miss entirely, and for retail premises it usually runs well ahead of the lender's review. Retail leases legislation in several states requires a landlord to tell a tenant, months before expiry, whether the lease will be renewed, and missing the deadline can extend the lease on its existing terms. The rules differ by state, apply to retail premises only, and are summarised below for the three states whose instruments we read at source.
Scroll the table sideways to see every column.
| State and Act | Lease with no option to renew | Lease with an option to renew | If the landlord misses the notice |
|---|---|---|---|
| Victoria, Retail Leases Act 2003 | Written notice offering a renewal or saying none will be offered, at least 6 and no more than 12 months before expiry. | Written notice no later than 3 months before the option can no longer be exercised, including the option date and the first year's rent. | No option: the lease is extended by 6 months from when notice is given. Option: the exercise date moves out by 3 months from when notice is given. |
| New South Wales, Retail Leases Act 1994, section 44 | Written notice offering a renewal or extension, or saying none will be offered, at least 6 and no more than 12 months before expiry (6 and 3 months for a lease of 12 months or less). | Section 44 does not apply, and the landlord does not have to remind the tenant of the option deadline. | The lease extends to 6 months after notice is given, but only if the tenant asks in writing before expiry. The tenant can then leave on 1 month's notice. |
| Queensland, Retail Shop Leases Act 1994, sections 46 and 46AA | Written notice of whether a renewal or extension will be offered, at least 6 months ahead for a lease over a year (3 months for shorter leases). | Notice of the option date at least 2 months ahead, though the Act attaches no penalty if it is missed. | No option: the tenant can request a 6 month extension, and may end it on 1 month's notice. |
Sources: Victorian Small Business Commission, options and renewals for retail leases; Retail Leases Act 1994 (NSW) section 44 and the NSW Small Business Commission on lease options; Queensland Small Business Commissioner, options to renew, last updated 2 July 2026. All read at source 21 September 2026. Retail premises only, and three states only. Office and industrial leases generally have no equivalent notice regime, though in Queensland the Property Law Act 2023, in force since August 2025, requires a landlord to give a breach notice before refusing a tenant's exercise of an option on the grounds of breach or late or non-compliant exercise, and that applies to commercial leases generally. South Australia, Western Australia, Tasmania, the ACT and the Northern Territory each have their own retail leases legislation with different rules. None of this is legal advice.
The reason that statutory timetable matters to a finance conversation is the sequence it creates. Where it applies, the landlord generally has to open the renewal question six or more months out. So the borrower may know whether the tenant is staying before the next finance event comes round, which means a scheduled review, renewal or refinance can be met with an answer rather than a question. That is the single most useful thing on this page, and it costs nothing to diarise. Where the property was bought with the tenancy already in place, the lease documents to check are the ones covered in buying a commercial property with an existing tenant, and the funding side sits on the commercial property loans page.
Put together, the dates suggest a sequence. The table below is an illustration of timing that tends to work on the files we see, not a lender requirement.
Scroll the table sideways to see every column.
| When | What to do | Why |
|---|---|---|
| 18 months or more before expiry | Put the lease expiry, next facility review or renewal, end of any interest-only period and loan maturity on one line. Read the lease for options, break clauses and notice requirements. | You learn which date arrives first while there is still time to act on it. |
| 6 to 12 months before expiry | Open the renewal conversation with the tenant. For a retail lease in Victoria, New South Wales or Queensland, this is when the landlord's statutory renewal notice falls due. | A tenant's intention in writing carries more weight at review than an assumption. |
| 3 to 6 months before expiry, if there is no renewal | Ask the leasing agent who works your submarket to put comparable letting times and incentives in writing. | It is the only letting-up assumption you can defend on a loan file. |
| Before the next facility review, renewal or refinance | Bring the renewal, a signed heads of agreement or a re-letting plan, with the lease, the expiry schedule, current facility statement and evidence of rent banked. | An answered question reads differently at credit from an open one. |
| At expiry | Treat any holdover as time bought, not a renewed term, and budget for the outgoings that become yours if the tenancy ends. | Rent can keep arriving after the contracted term has gone. |
A single-tenant property has a short firm lease tail, while the facility runs materially longer and a scheduled review falls first. The review is therefore the first finance event, not lease expiry. If a state retail-leasing timetable applies, the renewal-notice window may arrive next and turn the tenant's intention into a document rather than an assumption. By the following finance event the answer is ideally a signed renewal, a signed replacement tenant or a property actively marketed for re-letting with evidence behind the expected time and incentives. The facility itself may not have changed. What changes is whether the borrower reaches each date with an answer.
From our broking, indicative
What we see on tenanted commercial files we have placed, as at September 2026. Timing and process only, and deliberately no figures: there is no percentage we could honestly attach to a lease profile, and the section above explains why.
- Lenders want an expiry resolved, or visibly in progress, before it collides with a review, renewal or refinance. Bringing a renewal or a re-letting strategy before the lender has to ask changes the tone of the conversation more than anything else a borrower controls. Indicative, based on deals Switchboard has placed, as at September 2026.
- Once an expiry comes into view, the document set requested is consistent: the lease itself with every variation and option, the expiry schedule across all tenancies, evidence of rent actually banked, and whatever exists in writing about the tenant's intentions. A summary on a rent roll is rarely accepted in place of the agreements. Indicative, based on deals Switchboard has placed, as at September 2026.
- What tends to put a file aside at credit rather than decline it outright is an unanswered question, not a short lease. A short lease with a clear plan reads differently from a short lease with nothing attached, and the difference is documentation rather than duration. Indicative, based on deals Switchboard has placed, as at September 2026.
- The order that works is to fix the lease position first, then the valuation, then the finance structure. Files that run the other way round tend to re-do the valuation. Indicative, based on deals Switchboard has placed, as at September 2026.
Indicative only, based on commercial property deals Switchboard has placed, as at September 2026. This is not a quote, not an offer, and not an indication of approval. Actual terms and timeframes depend on lender policy, the valuation and your circumstances at the time of application. Not financial advice.
What does a vacant tenancy cost, and who publishes vacancy figures?
An empty month costs the lost rent and usually shifts more outgoings back to the owner. On a facility that materially relies on that tenancy, vacancy weakens the income the lender was relying on. The effect can be very different where other tenants remain, the borrower has other accepted income or the debt is primarily serviced from an operating business rather than from the property itself. That is why vacancy is a finance question as well as a yield question.
Do Australian commercial lenders use ICR or DSCR?
They can use either, and some use both. One current Australian Lease Documentation product sheet, checked 21 September 2026, publishes both an interest cover ratio and a debt service cover ratio. It defines ICR against net income and interest expense, and DSCR against net income and committed contractual loan payments, including principal where the contract requires it. That is product-specific evidence, not a universal Australian minimum. The practical point after vacancy is to identify which income your own lender counts, which debt payment it tests and whether the facility is interest-only or principal-and-interest. The related income-evidence path is covered in lease doc commercial property loans.
The market context is published, free and current. The Property Council of Australia's Office Market Report for the six months to July 2026 records Melbourne CBD office vacancy easing from 19 per cent to 18.9 per cent, still the highest CBD office vacancy rate in the country, against Sydney at 13.3 per cent and Brisbane at 10.2 per cent. Melbourne is the national worst case and the gap to the other two capitals is wide, so a borrower modelling a Melbourne office tenancy and a Brisbane one on the same re-letting assumption is modelling two different markets. Outside the CBDs, where most business owners' office property actually sits, national non-CBD office vacancy rose to 18.9 per cent over the same six months.
What Australia actually publishes, read at source 21 September 2026
- 18.9 per cent, the nation's highest. Melbourne CBD office vacancy eased marginally from 19 per cent to 18.9 per cent over the six months to July 2026, as tenant demand more than offset two new prime office developments opening. Source: Property Council of Australia, Office Market Report, as reported in its own media release, propertycouncil.com.au, basis the six months to July 2026, read at source 21 September 2026. CBD office markets only. Not retail, not industrial, not suburban office, and not a prediction about any individual building's re-letting prospects.
- 13.3 and 10.2 per cent. Over the same period, Sydney CBD office vacancy sat at 13.3 per cent and Brisbane CBD at 10.2 per cent, both well below Melbourne. Source: Property Council of Australia, Office Market Report, as reported in its own media release, basis the six months to July 2026, read at source 21 September 2026. Same scope limits as above. A CBD figure describes a market, not a building.
- 18.9 per cent outside the CBDs. Non-CBD office vacancy across Australia rose from 18.3 per cent to 18.9 per cent over the six months to July 2026, which the Property Council attributes to low supply and negative tenant demand. This is the market most suburban and owner-operated office property sits in. Source: Property Council of Australia, Office Market Report July 2026 chartbook, basis the six months to July 2026, read at source 21 September 2026. National non-CBD office markets only. Not retail, not industrial, and not a statement about any individual building.
- More than 53,000 square metres. A-grade offices recorded positive net absorption of more than 53,000 square metres over the period, which is why the headline vacancy rate moved down rather than up. Source: Property Council of Australia, as reported in its own media release, basis the six months to July 2026, read at source 21 September 2026. Prime stock in the Melbourne market only. Absorption at the top of the market does not describe demand for secondary space.
- Face rent and effective rent are different numbers. Face rent is "the rent shown on a lease which may or may not include incentives and may or may not include outgoings". Effective rent is "the actual liability for rent after adjustments for any incentives to the face rent are taken into account". Source: Australian Property Institute, AVGP 301 Rental Valuations and Advice version 2.0, section 4.0, effective 1 July 2023, read at source 21 September 2026. Guidance to valuer members on rental advice. Not prescriptive, and not a statement about what rent any property will achieve.
- The percentage shortcut is named as a mistake. The API states that "a common mistake is to reduce the incentive simplistically to a percentage over the term certain", and directs a cash flow comparison: the net present value of the cash flow including the incentive, against the net present value of a cash flow without it. Source: Australian Property Institute, AVGP 301 Rental Valuations and Advice version 2.0, section 6.5, effective 1 July 2023, read at source 21 September 2026. Same scope limits as above.
Every figure above is a market or guidance figure read at its source on the date shown. None of it is a statement about what any individual property will let for, how quickly, or on what terms.
How long does it take to re-let a commercial property in Australia?
There is no reliable national re-letting time you can safely apply to every Australian commercial property. Ask that question online and you will get a confident range. Check where it came from and the ground gives way. We ran the search and the answer panel that returned a duration range was grounded on two Quora threads and an Instagram post, with a Reddit thread at the top of the organic results. That is not a sourcing quibble. A letting-up assumption is a load-bearing input into a feasibility and into a serviceability calculation, and a number sourced from a forum post cannot carry that weight. We are not going to repeat the range, because repeating it would launder it.
What Australia actually publishes splits into three tiers, and knowing which tier a number came from tells you how much to lean on it. Vacancy by market is published free and twice yearly by the Property Council, as above. Letting-up duration and incentive levels by submarket are collected by the major agency research houses, and those sit behind research subscriptions rather than on the open web. Everything else, including most of what surfaces in a general search, is anecdote. The useful move for a borrower is not to find a national average at all. It is to ask the leasing agent who actually works your submarket what comparable tenancies have taken recently, and to get that in writing so it can go on the file alongside the valuation.
What is the difference between face rent and effective rent?
Face rent is the rent shown on the lease; effective rent is the economic rent after incentives are taken into account. Incentives are the reason the headline rent is often a fiction, and the API guidance above is unusually direct about the arithmetic. The shortcut of calling one year rent free on a five year lease a twenty per cent incentive is named as a common mistake, in part because it says nothing about when the rent free period falls. A rent free period at the front of a lease and the same concession amortised across the term produce very different cash flows in the years a facility is being serviced. Where a rent review rather than a re-letting is the pressure point, our note on rent review shock covers that separately, and where the lease itself is the income evidence on the application, see lease doc commercial property loans. What all of this does to the rate quoted is a different question, taken up in commercial property loan rates, and if your own interest in the land is the short one rather than the tenancy, start at leasehold.
A tenancy is signed at a headline rent with twelve months rent free at the front of a five year term. Priced the shortcut way, that reads as a twenty per cent incentive and the rent is quietly discounted by a fifth across the board. Priced the way the API guidance directs, you build the actual cash flow with the rent free period where it really falls, take its net present value, and compare it against the same cash flow without the incentive. The two methods give different effective rents, and they diverge most in exactly the years a new facility is being serviced, because the shortcut spreads a concession that in reality all lands up front. Nothing here is unusual or improper. It is simply that the face rent on the lease and the money arriving in year one are not the same number, and a serviceability calculation built on the first one is built on the wrong one.
What protection do you have if your tenant leaves and your lender acts?
It depends on the facility and the lender. Lease expiry or vacancy does not create one universal enforcement outcome. The contract decides whether lost rent, a covenant breach, failure to provide information, a scheduled maturity or another event gives the lender rights to revalue, demand information, vary terms or enforce. Where the lender is a bank that subscribes to the Banking Code and you fall within the Code, additional Code notice protections can apply.
What should you check in the facility before the tenant leaves?
Read the clauses that decide what happens before there is a problem: when the lender can revalue, what information it can require, which covenants are tested and when, what counts as an event of default, what notice or cure period applies, what happens at facility maturity, and what fees or costs can arise if the loan is varied, extended or discharged. If the facility is business-purpose commercial credit, have a solicitor explain those provisions rather than assuming consumer mortgage protections apply.
Where your lender is a bank that subscribes to the Banking Code of Practice, the 2025 Code sets out timeframes in plain terms. Under clause 82, if a borrower has not met a loan payment obligation, the bank "will give you no less than 30 Days' notice of the payment failure before we make a demand for full repayment or take Enforcement Proceedings", subject to the carve-outs the Code names. Under clause 88, where the default is one of the grounds the Code lists, the bank will give a notice specifying those grounds and "no less than 30 Days' notice of the Default" to remedy it where it can be remedied. Clause 97 is directly on point for a page about valuations: where the bank has received a valuation of commercial or agricultural real property that the borrower paid for, it "will provide you with a copy of that valuation and the related valuer instruction (except where Enforcement Proceedings have commenced)". Source: Australian Banking Association, 2025 Banking Code of Practice, clauses 82, 88 and 97, in effect 28 February 2025 and approved by ASIC in June 2024, read at source 21 September 2026.
The qualifier is the point of the section rather than a footnote to it. The Code binds subscribing banks only, its protections turn on whether the borrower falls within the Code's own definitions, and shorter notice applies where a borrower is insolvent or presents a material immediate risk. Whether a particular commercial property borrower is covered is a question to settle against the current Code and with the bank, not an assumption to carry into a difficult conversation. Read the position before you need it.
Two scope points are worth checking early, because both turn on size. The 2025 Banking Code expanded its small business definition from $3 million in aggregate borrowings to $5 million, which ASIC said would bring another 10,000 businesses within it (ASIC media release 24-136MR, 27 June 2024). A business owner whose total borrowings sit above that limit may fall outside the Code's small business protections, which matters for anyone holding more than one commercial property. AFCA has its own, different tests: it defines a small business as one with fewer than 100 employees, excludes a business whose group has 100 or more, and cannot consider a complaint about a small business credit facility above $6.3 million, for complaints lodged on or after 1 January 2024. AFCA also states that responsible lending obligations do not apply to small business lending, so there is no unsuitability test for a business loan (AFCA, small business complaints, read at source 21 September 2026). Check each definition against your whole group, not just the one facility.
ASIC states that the law "provides the lowest level of protection to commercial loans, including loans to small businesses", and that this limits ASIC's ability to act against lenders on commercial loans. It also states that lenders providing only commercial loans "are not required to have a credit licence and are not legally required to be a member of AFCA", while AFCA can hear a complaint involving a member firm where it falls within AFCA's limits. Source: ASIC, Information Sheet 207, disputes about commercial loans, read at source 21 September 2026. General regulator guidance, not legal advice, and not a statement about any particular lender or contract.
That last point converts into one concrete action. Whether a specific lender is an AFCA member is checkable, free, before you sign, on AFCA's own financial firm search. Do not rely on a membership certificate: AFCA stopped issuing them from the 2025-26 financial year and points to the online search as the way to confirm membership, as reported by the National Insurance Brokers Association. It takes a minute and it is the single most informative thing a commercial property borrower can find out about a lender they are about to borrow from. It matters most where the lender is outside the banking system, which is the territory covered in private lending.
Scroll the table sideways to see every column.
| Who your lender is | What notice applies | Who hears a complaint | What to check first |
|---|---|---|---|
| A bank subscribing to the Banking Code, borrower inside the Code's scope | The Code's timeframes, including no less than 30 days' notice of a payment failure before demand or enforcement, and no less than 30 days to remedy a listed default where it can be remedied. | The bank's internal process, then AFCA, which every bank is a member of. | Whether you fall inside the Code's own definitions, and what the current Code says, rather than assuming coverage. |
| A bank subscribing to the Banking Code, borrower outside the Code's scope | Whatever the loan contract says. The Code's small business commitments do not reach a borrower the Code does not cover. | The bank's internal process, then AFCA, subject to AFCA's own limits, including a $6.3 million cap on the small business credit facilities it can consider. | The default, demand and enforcement clauses in your own facility agreement, read before you need them. |
| A non-bank lender that is an AFCA member | Whatever the loan contract says. The Banking Code does not apply to a lender that does not subscribe to it. | The lender's internal process, then AFCA, because membership is what creates the external route. | Confirm the membership on AFCA's member search rather than on the lender's own marketing. |
| A commercial-only lender that is not an AFCA member | Whatever the loan contract says, and ASIC states the law gives commercial loans the lowest level of protection. | No compulsory external dispute scheme. ASIC states such lenders are not legally required to be AFCA members. | Membership status before signing, and independent legal advice on the enforcement provisions. |
Before signing a short-WALE refinance, ask these six questions
- Is the lender an AFCA member? Check the current status on AFCA's own Financial Firm Search.
- When can the property be revalued? Ask who can order it, who pays and what happens if the value falls.
- Does vacancy or lease expiry trigger anything by itself? Read the reporting, covenant and default wording rather than assuming it does or does not.
- What notice and cure period applies? Distinguish the contract from any Banking Code protection that may also apply.
- What happens at maturity? Know whether extension is discretionary and what evidence will be required.
- What does it cost to leave? Ask for establishment, legal, valuation, variation, extension, default, discharge and early-exit costs in writing.
The objective is not to avoid specialist finance. It is to know the exit, the enforcement path and the revaluation rights before the short lease becomes urgent.
None of that is a reason to avoid non-bank or private lenders, which do work that banks will not and often solve exactly the problem a short lease creates. It is a reason to know which column you are in before the tenant leaves rather than after, and to read the enforcement provisions of a commercial facility with a solicitor rather than on the assumption that a consumer-style process sits behind them. The wider lending context sits on the commercial property loans page and across the property lending hub.
WALE is only the first layer. The useful lending question is how the firm lease term, tenant concentration and valuation basis line up with your own facility dates. Australia has no national minimum WALE, but individual lender products can tie their term to lease expiry, some exclude unexercised options, and an imminent expiry can lead to a vacant-possession valuation instruction. If the tenant may leave, work forward from the next contractual date: get the renewal or re-letting evidence, understand which income the facility relies on, prepare the valuation and refinance case, and read the lender's review, revaluation, default and enforcement rights before time pressure removes your choices.
If you would like a second read on your own position, send us the expiry schedule, the leases and your facility's review and maturity dates, and we will tell you where the pressure points are and which lenders are likely to fit.
Key takeaway: do not ask only whether your WALE is good. Ask what the firm lease term does to your loan term, valuation, serviceability and next finance date, then fix the first problem in that sequence.Frequently asked questions
WALE, or weighted average lease expiry, is the average time left on the leases over a commercial property, weighted by each lease's share of rent or lettable area. It tells you how long the rent is contracted for, not whether the tenant will renew or what a lender will advance. See how your tenant sets your LVR for the separate tenant-quality question.
Multiply each lease's remaining term in years by its share of total rent, or its share of total lettable area, then add the results. Always state which basis you used and which expiry date you treated as the end of each lease. The worked WALE calculator above lets you run both methods.
Both methods are used and they are not interchangeable. Income weighting shows how much of the rent roll is contracted and for how long; area weighting shows how much of the floor space is committed. Read the calculation section before comparing two quoted WALE figures.
Not by income, because vacant space produces no rent and therefore carries no income weight. Area-based figures can also be misleading if a report does not say whether the denominator is leased area or total lettable area. Read WALE alongside occupancy and the vacant commercial property finance position.
There is no national Australian minimum WALE. The more useful test is whether the firm tenancy profile supports the proposed loan term, valuation and servicing assumptions, taking account of concentration, break rights, options and re-letting risk. The tenant covenant guide covers the separate question of who is paying the rent.
Not automatically. A longer firm term gives more certainty about rent and can support a longer product term on some rent-supported loans, but there is no national WALE-to-LVR formula. Valuation, serviceability, tenant quality, property type and the lender's own policy still matter. See the commercial property loan guide for the wider assessment.
WALE can matter less where the property is treated as owner occupied and the debt is serviced from the trading business rather than external rent. The lender may look through a related-party lease to the business and the valuer may use a vacant-possession basis. See passive versus owner-operated commercial property for the structural difference.
Yes, a short lease does not automatically rule out refinance, but it can narrow rent-supported products and change the valuation or loan term. Bring the full lease pack, expiry schedule, current facility details, renewal or re-letting evidence and any other income the new lender may accept. The vacant commercial property finance guide covers the next step if the tenant has already left.
There is no universal consequence on the day the lease ends. The outcome depends on the facility agreement, whether repayments still service, whether a covenant or reporting event is triggered, the next review or maturity date and what the property is worth without the lease. Use the commercial loan covenant and interest-only expiry guide if the finance date is already close.
In several states, yes, for retail premises, and the timing differs by jurisdiction and by whether an option exists. Missing the required notice can affect the lease end date. The state table above is a starting point only, so have a solicitor apply the current retail-leasing law to your property before acting.
No. Commercial facilities do not all have an annual review. Some products disclose periodic reviews, some disclose no annual reviews, and some facilities are reviewed only when a contractual event or variation occurs. Use the actual review, renewal, interest-only expiry and maturity dates in your facility. See the commercial interest-only expiry guide if one of those dates is approaching.
It depends on the lender, the contract and whether the Banking Code applies. A subscribing bank gives a covered borrower at least 30 days' notice of a payment failure before demanding repayment or enforcing, subject to the Code's exceptions. Other commercial facilities can depend primarily on the contract. Read the commercial loan covenant guide and confirm AFCA membership before signing.
FBAA Accredited
