Capitalisation rate is annual net rental income divided by property price, expressed as a percentage. It is the standard commercial property yield measure. In Australia, commercial cap rates typically range from 4.5% (prime CBD office) to 8% or higher (secondary retail, industrial). Higher cap rate usually means higher risk or lower growth potential.

What is the rent step at option exercise?

When a commercial lease expires and the tenant exercises an option to extend, rent typically resets to market. This step-up is often the single biggest driver of return on a commercial property. The calculator lets you model an expected step-up percentage at each option exercise year.

What LVR is used for commercial property?

Commercial property lenders in Australia typically cap LVR at 65-70%, compared to 80% for residential. This calculator defaults to 70% but is fully overrideable. Higher LVRs may be available with strong tenant covenants or specialist commercial lenders.

Commercial quick-add

Model a commercial property in 60 seconds.

Purpose-built for Australian commercial property strategy. Enter the essentials: sector, price, annual net rent, LVR, and lease expiry. See your yield, cashflow, and the modelled rent step-up at lease review. Defaults are the ones the StratMap tracker uses: sector net cap rates (Retail 5.80%, Office 6.10%, Industrial 5.40%, Medical 6.13%), sector vacancy (Retail 5.6%, Office 14.4%, Industrial 3.9%, Medical 2.0%), 70% LVR, a 7.5% rate and each state's stamp duty schedule. Every default can be overwritten. If you then decide to buy it, load the property into your tracker for full DD, market data, and 30-year projections.

Inputs

Property + purchase

Purchase price $

Sector

Net cap rate (sector default) %

Annual net rent (after outgoings) $

Vacancy allowance (sector default) %

LVR %

Loan interest rate %

Ownership term yrs

Rent trajectory

Annual rental increase %

Lease expiry (year N) Y

Rent step at option (market review) %

Options remaining

The value piece. A commercial lease review at option exercise typically resets rent to market. The model shows the rent step-up as its own line so its effect on the return can be read as numbers. Move the sliders and watch how the trajectory shifts.

Acquisition costs

State

Stamp duty (state schedule) $

Solicitor + valuation $

Other purchasing costs $

Growth assumption

Annual capital growth (sector long-run default) %

Net cap rate

6.5%

Rent / Purchase

Y1 cashflow

$10,750

After vacancy + interest

Cash-on-cash

3.2%

Y1 return / cash in

Total cash in

$299k

Deposit + costs

End-of-term value

$1.26M

Y10 modelled value

End-of-term equity

$666k

Value less loan

Annual net income trajectory

Net rent less the vacancy allowance. The step at lease expiry reflects rent reset to market at option exercise.

Net income after vacancy Interest cost

Rent trajectory events

How this compares

Your inputs plotted against typical Australian commercial ranges. The dark line is the default for the sector. Numbers only. What that means for your decision is between you and your team.

Cap rate6.5%

4%Retail net cap rate 5.8%10%+

Y1 cash-on-cash+3.2%

-5%Breakeven 0%+10%

Growth assumption4%

0%Retail long-run default 3.0%8%+

See the full 30-year picture

This calculator shows Y1 numbers. StratMap models 30 years across residential + commercial, tax, lease step-ups, and portfolio interactions. Free.

The tool models. Not financial advice. Cap rate, cashflow, and end-of-term projections are estimates based on your inputs and the defaults the StratMap tracker uses (sector net cap rates and vacancy, 70% LVR, 7.5% rate, each state's duty schedule with SA commercial transfer duty abolished from 1 July 2018). Long-run commercial growth is a stated assumption, not a measured series. Real transactions depend on lease terms, tenant covenants, condition, tax position, and finance approval. If you decide to progress on a specific property, load it into your tracker for full DD, market data, and 30-year modelling.