Real Estate Forecasting: Rental Revenues. There is more to forecasting revenues than space times market rent. We need to consider, of course, the actual space leaseable to the tenant, which is called the net leaseable area. Rent for residential housing is per unit. Although the price is still driven by the usable space inside the unit. Same with hotels. The maximum revenue from all units or all space being rented is called the gross potential rent or GPR. However, in any building with multiple tenants or even a single tenant, there's the possibility that the unit or space may go unrented for a period of time. This happens when there are market discrepancies between rental prices and demand and it happens when space is vacant between tenants during lease negotiations and build outs. Vacancies should be calculated or factored in to any model. In addition, free rent or rent concessions are often given to attract tenants and should be deducted from GPR. Lastly, some tenants will end up breaking leases and not paying rent and these expenses, particularly in residential buildings, must be considered. The net of all of these revenues and deductions is called net rental revenue. The ability to retain good tenants is very valuable in commercial real estate. However, tenants will move out based on many factors beyond the building owner's control. The gaps between tenants can be costly to owners and investors. A sophisticated model will include assumptions about the start and end of lease and the probability that the lease will be renewed. One outcome is that the lease will be renewed at market or near market rates. Another is that the current tenant leaves in a period of vacancy, new lease terms and build outs or tenant improvements follows. One way to handle this is to use a weighted average of the two possible outcomes based on expected probability. This relies heavily on the assumption of that probability but it is also more conservative than choosing one outcome over the other.