Market Parameters

Foundational information for forecasting

At its core, a financial model predicts the amounts and timing of all cash flows for a property within a set timeframe. This requires not only entering information about the current situation but also defining rules and assumptions about future events. This is where market parameters come into play.

Over time, your property will experience tenant turnover, rental rates will change and operating costs will increase with inflation. Market parameters are made up of two elements.

Inflation, CPI and growth schedules

Schedules for inflation, CPI and growth define how rental rates and expenses will change over time. They are an index that can be linked to virtually any model input field. Once linked, ReturnSuite will automatically index each future cash flow, based on its timing, against the calculated multiplier.

The name and order of each schedule is how they will appear throughout the model. For a detailed explanation of each field, check out Schedules in using ReturnSuite.

Leasing rules

Leasing rules define the market rent for the property and the rules that ReturnSuite uses to forecast the future leasing of vacant space.

Over time, leases expire and spaced within a property become vacant. Leasing rules are the set of assumptions that are used to forecast the rates, terms and timing of any new leases. Leasing rules are also used to determine the underlying market rate for a property. Because of this, leasing rules are one of the most important and complex parts of a cash flow model.

Leasing rules should be created with the current market rates, terms and timings. You can create multiple leasing rules, so the different spaces within a property can be modeled accurately.