Commercial Property Lease Rollover Risk in Alberta

1. Build a clause-supported expiry schedule

For every tenancy, record current contractual expiry, rent, area, options, notice windows, termination rights, contraction or expansion rights, holdover provisions and source clauses. Reconcile the schedule to amendments and current occupancy.

Separate current term from unexercised options. A renewal discussion, broker expectation or budget assumption does not extend the contract.

• Expiry
• Notice window
• Options
• Current rent
• Area
• Termination rights
• Source clause

2. Identify concentration by period

Group expiring area and rent by month, quarter and year, then identify the tenants and premises driving each concentration. Compare area-weighted and rent-weighted exposure.

An average lease term can conceal a major near-term expiry. Preserve the tenant-level schedule and show vacancy and owner occupancy rather than excluding them from the risk picture.

3. Verify renewal rights and status

Review option eligibility, notice mechanics, rent-setting process, conditions, exclusions and dispute procedures with counsel. Track actual notices and negotiations separately from contractual rights.

Do not treat an option as exercised until the required process is complete. Do not present a landlord forecast as a tenant commitment.

4. Assess tenant covenant and operating fit

Review current, appropriately authorized tenant financial, payment, business, registry and insolvency evidence. Consider whether the premises and location continue to support the tenant's operation.

A tenant can have the right to renew without the ability or desire to do so. Conversely, strong occupancy history does not guarantee a future decision.

5. Compare contract rent with current evidence

Compare existing rent, recovery structure and incentives with current competing space, completed leasing evidence where available and property-specific differences. State whether the analysis uses face rent, effective rent or another defined measure.

Above-market rent can create renewal and value risk; below-market rent can still require capital, downtime and negotiation. Asking rent alone does not establish achievable net economics.

6. Scope the physical turnover

Inspect suite condition, tenant improvements, signage, equipment, hazardous materials, restoration duties, demising, accessibility, systems and code or permit records. Determine what work is required for a likely replacement user.

Allocate removal and restoration responsibility under the lease, but model collection and execution risk separately. A contractual obligation does not guarantee timely completed work or reimbursement.

7. Build the leasing-cost schedule

Estimate design, permits, demolition, repairs, landlord work, tenant improvements, commissions, legal fees, marketing, incentives, moving or phasing and contingency. Identify when cash is required and what lender approval may be needed.

Keep capital and operating costs separate. Do not offset a future leasing cost against hypothetical rent growth without showing timing and source assumptions.

8. Model downtime and carrying cost

During vacancy, include taxes, insurance, utilities, security, maintenance, snow, landscaping, management, debt service and other owner costs, plus lost base rent and unrecovered expenses. Run more than one absorption scenario.

Model partial occupancy and staged work where the premises can be divided. Confirm whether building and municipal constraints support the assumed configuration.

9. Connect rollover to financing and value

Provide lenders and appraisers with the current lease file, expiry schedule, tenant evidence, capital plan and leasing assumptions. Stress-test coverage, reserves, loan maturity and refinance timing against the rollover calendar.

RECA's commercial competency framework connects tenant covenant, net effective rent, adjusted and stabilized NOI, cap rates, leverage and sensitivity analysis. The required conclusions may extend beyond brokerage scope.

10. Turn the schedule into an action plan

Assign each upcoming expiry an owner, decision date, tenant-engagement plan, market test, space plan, capital budget, approval path and fallback. Update the record when facts change.

This guide is educational and is not legal, appraisal, accounting, lending, construction or investment advice. Renewal, reletting and value outcomes depend on the actual contract, tenant, property and market evidence.