A Practitioner's Guide to Obsolescence, Re-Leasing Economics, Repositioning and What an Office Building Is Actually Worth
Julian R. Sterling
These are the companion files of Office Real Estate by Julian R. Sterling.The book on Amazon →
A multi-let office is offered at €43.0 million on a 6.00 per cent net initial yield. Every line of
that calculation is correct, and it is not a return. Put the re-letting cycle back in and the same
building yields 3.20 per cent; run it for ten years and it is worth €32.6 million, against a valuation of €42.8 million
that is competently produced and answers a different question.
These are the workbooks the book was written from, corrected where they were wrong. Every figure the book prints is reproduced by
a live formula, and each model workbook ends with a sheet that compares the two line by line and closes on a single verdict.
Around them: the same models with the inputs emptied, thirteen working documents to print, forty questions that mark
themselves, and three cases the book names and never takes to a number.
Thirteen workbooks, the printable documents and the read-me. Each group below can also be
downloaded on its own. Last revised 24 September 2026.
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These carry the book’s own figures, so that every number it prints can be traced to a live
formula. Each model workbook now closes on a checks sheet that ends ALL OK.
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Chapters 1, 5 and 6
The yield you are actually buying
The quoted net initial yield, the reversionary yield and the capital-adjusted yield on one sheet, with the fit-out cost, the void, the incentive and the letting fee as inputs you move. It computes the three yields — 6.00 per cent, 7.39 per cent and 3.20 per cent — and the fit-out level at which net income disappears (€1 121/m² per cycle). A new sheet splits the cycle into its four parts — fit-out 46 per cent, void 27, rent-free 23, fees 4 — and sets out the capital-adjusted yield line by line: the 3.20 per cent is on the price including acquisition costs, €45.8 million, not on the €43.0 million the book’s table names.
A rent-free period, a fit-out contribution, agency and legal fees and a term certain, converted into the single number the owner actually banks — €163.8/m² of a €300/m² headline. It runs in both directions, so you can also solve for the headline you must achieve to deliver a net effective rent you are willing to underwrite. New: what the tenant’s break costs (€231.9/m² over ten years against €163.8 over five, €817 200 a year on this building), total occupancy cost with the €2.5 million a €15 service-charge gap destroys, and the price of an indexation cap.
The whole re-letting cycle, quarter by quarter, lease by lease: expiries, fit-out, voids, incentives, the dated energy capital call and the exit. Every cell is a formula. It is the model behind the €32.6 million valuation and the 4.32 per cent internal rate of return at the asking price. Revised: every sensitivity the book prints now runs on its own live copy of the cash flow — twenty-three of them, from the void and the exit yield to density, the energy standard missed and the four values that would justify the asking price — with the layer method, the bridge, the year-ten buyer and debt capacity alongside. Two corrections: rung one of the Chapter 9 bridge is €7.1 million, not €7.6 million (the empty floor’s void was charged twice), and the energy works protect €14.3 million, 7.5 times their cost, not 7.8 (they had been added back at their nominal cost to present values). 103 checks.
The four-way comparison, with the residual land value calculation for a residential conversion and the two thresholds at which comprehensive repositioning becomes the right answer — a post-works rent of €401/m², or works at €525/m². Revised: the four strategy values and both thresholds were typed-in numbers checked against themselves; they are now computed, and each threshold is proved on its own sheet (the typed €403 is €401 on the live model). The residential price at which conversion overtakes the office read €31 592/m² in the file; it is €8 271/m², as the book prints. A further sheet shows repositioning with the energy upgrade inside the works: €26.3 million; holding still wins.
The eighty questions of Appendix A as a live checklist, in the same order, from the same source file as the chapter. Columns for the answer, the source document, the owner and the date; the status column marks any question answered without a source as unsourced.
The four model workbooks with every input emptied. The checks sheets count what is still missing and test what holds for any inputs.
Chapters 1 to 21
Your rent roll, your cycle, your strategies
The yield, the net effective rent, the ten-year cash flow and the four strategies, with the same formulas and every input emptied. The twenty-three sensitivity steps stay: each runs on your building as soon as the inputs are in. The eighty-question checklist already arrives empty, so it has no blank twin.
The book’s inputs are listed in a text file inside the archive. Type them back in and the book’s figures come back with them: 3.20 per cent, €32.6 million, 4.32 per cent at the asking price.
Thirteen pages to print and use. A4, with margins wide enough for US Letter.
Chapters 1 to 24
Thirteen working documents
The three yields on one page. The rent roll, the lease profile and the condition. Headline to net effective, and total occupancy cost against three competing buildings. The re-letting cycle, dated unit by unit. The valuer’s number and the bridge to the cash flow. Reviews, breaks and dilapidations. The ten-year cash flow summarised for the paper, with the year-ten buyer. The energy deadline and letting as it stands. The two cliffs, density and the smallest lettable unit. The four strategies and the repositioning thresholds. Debt sizing. The bid and what would have to be true. And the one-page asset management plan with the committee paper.
A workbook that marks itself. Answer in the yellow cells; the marking fills in as you go.
All parts of the book
Forty questions on the book
Seven on yields and rent, seven on the re-letting cycle and the value, seven on the cash flow, the exit and capital, six from density to strategy, seven from debt to the committee paper, and six on the three cases below. Numbers are marked to a tolerance, multiple choice to the letter, and the score sheet counts your errors part by part: that is your revision list.
Nothing is hidden. The marking sheet holds every answer, every tolerance, and the reason for each answer.
New material, not a restatement. Three situations the chapters name and never take to a number. Each case is one workbook: the note is the first sheet, the model is the book’s own cash flow, and a checks sheet closes it. Type your own figures in and every finding recomputes.
Chapter 7 · Case one
The surrender offer
Tenant B offers to leave two years early (ADDED). The chapter says the premium must cover the cycle brought forward; on the book’s cash flow that is €525 278 paid on the day it leaves, 0.56 years of its rent, against €29 140 of overage the surrender extinguishes: 18 times more. The trade is the cycle, not the overage.
Chapter 16 · Case two
Less space, better space
Density unit by unit, as the chapter describes it and never computes: the large floor gives up 20 per cent at each renewal, the middle two 10, the single suite none (ADDED). Value falls 13.6 per cent, 69 per cent of it Tenant A alone. To hold the base value, re-let space would need €347/m² — what the building earns only after the comprehensive works Chapter 18 shows do not pay.
Chapter 21 · Case three
Three things instead of price
The agreement for lease, the rental guarantee and the regear the chapter asks the vendor for, each valued on the book’s cash flow (terms ADDED). The regear of Tenant A is worth €2.53 million, 4.0 euros per euro it costs the vendor. The guarantee is worth 0.79 per euro: less than a price cut, unless the risk it removes is priced.
Blue on pale blue is an input you may edit. A yellow fill is the carrying assumption of
the sheet — the one to argue about first. Black is a formula. Nothing is locked, protected
or watermarked. There are no macros and no external links.
Each model workbook ends with a sheet called Checks: the figure as the book prints it,
the figure the workbook computes, the variance and a status. If a line ever reads
“to check”, the workbook and the book have drifted apart — and the workbook is
right. The last line of every checks sheet gives the verdict: ALL OK.
A figure the book does not give, used in the cases, is marked ADDED wherever it
appears. The workbooks open in Microsoft Excel, LibreOffice Calc, Google Sheets and Numbers; the PDF
prints on A4 or US Letter.
Three numbers to compute on your own building
The capital-adjusted yield — 3.20 per cent here, against a quoted 6.00 per cent.
The share of value sitting in the exit — 74 per cent here. Above roughly two
thirds you are not buying income, you are buying a view about the next buyer.
The distance to the income cliff — today's fit-out as a share of the
level at which net income reaches zero. 37 per cent here.
What changed, and when
24 Sep 2026
The workbooks corrected and each checks sheet closed on ALL OK. Every sensitivity the book prints is now a live sheet. Chapter 9: rung one of the bridge is €7.1 million, not €7.6 million. Chapter 13: the energy works protect €14.3 million, 7.5 times their cost, not €14.7 million and 7.8. Chapter 18: the four strategy values and both thresholds are computed, not typed; the post-works rent that makes repositioning pay is €401/m², not €403; the conversion break-even price in the file is corrected to €8 271/m². Chapter 6: the 3.20 per cent is on €45.8 million including costs. Added: a blank set, thirteen working documents, forty questions that mark themselves, and three cases.
When does an office-to-residential conversion pay?Run two residuals on one building. Conversion beats refurbishment by 1,641,121 here, but flat prices 4.9 per cent lower, at 7,612 per m², erase the gain.
Does an energy upgrade pay for itself on an office?Price it as two cash flows, not a bill saving: a 2.8M upgrade on an 8,000 m² office protects rent and exit value worth 4.29M net, an 18.9 per cent return.
How fast does an office building depreciate?Compare it with a building that stays new: 1.0 per cent rental depreciation and 8 bp of yield drift a year cost an office 2.46 per cent a year against prime.
How do you value a vacant office building?Defer the let value for void plus rent-free, less works, holding costs and fees: 14.1 million empty against 21.6 million let, 34.6 per cent lower.
How much office space do you need per employee?Size desks for the peak day, then add meeting, support and circulation: 200 staff at 70 per cent peak attendance need 1,552 m², 7.8 m² per employee, not 10.
Closing the DealTwo defensible bridges 20.70 million apart, a peg worth 7.00 million, and the six choices that remove 6.60 of a 12.00 earn-out.
CMBS and CRE CLOsWhere the loss actually lands, from appraisal reduction to realised severity, and what the B-piece is really being paid for.
How to Read a Commercial LeaseThe three refinements chapter 19 names and never performs, and the renewal rate below which the mark-to-market is worth nothing.
How to Read a Credit AgreementWhere the default actually comes from, the cure that costs 5.5 times the other, and the capacity nobody adds up.
How to Read a Real Estate Loan AgreementThe cure ratio in closed form, the four-point window in which the cheap cure works, and the cure sized to the wrong threshold.
Private Equity Real EstateBoth worked waterfalls to the dollar, the two capital stacks, and the arithmetic of the promote made changeable.
Private Markets PerformanceThirty-one of the thirty-three figures chapter 19 publishes reproduce exactly — and the two that do not are named rather than quietly adopted.
Raising a Real Estate FundThe chapter 17 funnel run on a calendar — when the first close actually lands, and why more travel does not help.
Real Estate Financial ModelingProperty, development and fund models built line by line, and the modelling test worked end to end.
Real Estate Fund ManagementThe waterfall of 6.11, the build-to-core of 8.7 and the proceeds gap, reproduced as live formulas rather than asserted.
REIT Analysis and ValuationFFO of 532.0, AFFO of 381.0, net asset value and dividend safety — every figure a formula you can change.
Retail Real EstateThe occupancy cost of every unit in a centre, the sixteen per cent of the rent roll no tenant can sustain, and the right-size-convert-or-hold decision priced.
Sale and LeasebackA €179.5 million transaction end to end, with rent cover measured on the entity that actually signs the lease.
Self-Storage Real EstateThe cohort engine behind a 590-unit store, and the rate increase on existing customers priced against the move-outs it causes.
The Fund Finance ProfessionalChapter 8 builds the reported-to-eligible NAV bridge; chapter 9 computes every ratio without it. Two points at every state — and what a subscription line does to the IRR.
The Growth Equity InvestorWhat a pro rata cheque really costs, and the band where defending your ownership loses money.
The Private Credit InvestorThe two coverage ratios are not measured on the same thing: the erosion is 47.7 per cent, not the 28.7 the headline implies.
The Private Equity Fund Controller PlaybookThe book defines IRR, DPI, RVPI and TVPI, tells you to update them at the exit, and prints not one value. Computed: a 1.833× deal inside a fund at 0.892 TVPI.
The Venture Capital AssociateWhat defending a position costs, and how many companies a reserve pool actually defends.
Real Estate FinanceFour people look at one building and reach four numbers; the lender is whole only above 105,109,489, twelve per cent below today’s value rather than forty.
Financial Risk ManagementA fund inside every limit that cannot meet a redemption — and the number that decides it is the one with no currency attached.
Business ValuationThree advisers land 26.8 per cent apart on one company, and the whole gap turns out to be 1.96 points of perpetual growth.
Quantitative FinanceThree models agree to a quarter of one per cent about a number that one unobservable input moves a hundred and three times as much.
Asset ManagementFour people quote four returns for one mandate, all correct and 2.7017 points apart — forty-eight times the manager’s net skill.
Alternative InvestmentsA manager reports 13.29 per cent and the endowment earns 6.26 — both correct, and only a third of the advertised advantage arrives.
Credit AnalysisFour defensible EBITDAs on one borrower give leverage from 3.19x to 6.47x — and the add-back argument is fifty times the covenant headroom.
Venture CapitalOne company out of twenty-eight returns 56.7 per cent of the fund, and half the capital goes in after the decision — at half the return.
Machine Learning for FinanceFive people quote the accuracy of one credit model, all five are right, and the number that decides how much money it makes is none of them.
Commercial Real Estate InvestingThe equity earned 8.6647 per cent and the investor received exactly 8.0000 - the preferred return, and nothing above it.
Mergers and AcquisitionsThe board paper says the deal creates 13,436,667 of value. The arithmetic says it destroys 17,530,855. Nobody is lying.
DerivativesThe treasury report says the hedge cost 1,233,698. That is the interest differential, not a cost. The number that mattered appears in no report at all.
Treasury ManagementFive cash balances for one company, all correct and 145,600,000 apart — and the revolver that is two-thirds of the liquidity leaves at a revenue fall of 8.4127 per cent.
Financial Planning and AnalysisRevenue 3.0190 per cent above budget and operating profit 16.3209 per cent below it, in the same quarter, with every figure correctly stated.
Energy TradingA position report that is 91.7031 per cent hedged and correctly computed, on a book that is short 2,542,000 MWh — and a margin call of 198,400,000 the next morning.
Construction Cost ControlA contract sum of 26,301,102 became a final account of 29,153,363 on the building that was drawn — and 85.8 per cent of what was lost was knowable on the day it was signed.
Trade FinanceSix routes to payment on one 4,200,000 export order cost between 178,040 and 223,268, a spread worth 14.8 per cent of the margin, and a day of buyer credit costs 1,031.76.
Cost AccountingOne factory costed twice on the same 13,440,000 of overhead, and 4,053,091 moves between four product families.
Pricing StrategyA list price of 148.00, a pocket price of 112.51, and the nine deductions in between — with what one point of price is actually worth.
Contract ManagementA bid 5.50 a unit cheaper, signed on paper worth 9.81 a unit more — and 94.68 per cent of it was knowable on the day of signature.
Capital MarketsFour defensible readings of one bond, the cost of an issue under each convention, and the placement discount computed at a constant discount.
Financial RegulationThree ratios pass and the fourth is in breach by 1,956.0 million: the output floor, the liquidity buffer after encumbrance, and the loan split.
Bank ManagementFour defensible readings of one balance sheet, the deposit beta measured two ways, and the liquidity that lasts 3.9 days.
The Real Estate WorkoutFour ways out of one broken loan, discounted to today, and the 58.7 cents at which a payoff beats enforcement.
Go beyond the companion files
Office Real Estate develops the complete framework behind these models, with the assumptions, trade-offs and worked examples tied together.
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