Why standard multifamily proformas fail for flex space — and the segment-based modeling approach that produces accurate projections.
You download a commercial real estate proforma template. You plug in your numbers. It says your project returns 18% IRR. You just discovered the template trap. The problem isn't the spreadsheet — it's that flex industrial has fundamentally different economics than the templates were built for.
Standard commercial real estate proformas make three assumptions that break for contractor garages:
| Assumption | Multifamily | Flex Industrial |
|---|---|---|
| Revenue per unit | ✓ Consistent | ✗ Varies by bay size |
| Occupancy risk | ✓ Spread across units | ✗ Concentrated per bay |
| Tenant turnover | ✓ 40-60% annually | ✗ 15-25% annually |
| Operating expenses | ✓ Predictable % of revenue | ✗ Fixed costs dominate |
| Rent escalation | ✓ Annual increases standard | ✗ Requires lease renewal |
When you run a standard proforma, it assumes every bay rents at the same rate, that vacancy is evenly distributed, and that you can raise rent 3% every year regardless of lease status. None of these hold for flex industrial.
A standard template might show you hitting 85% occupancy by month 6 at full rent. In reality, contractor garage occupancy typically plateaus at 60-70% for the first 8-12 months. That gap is where deals die.
Instead of one "average rent" line, you model each segment separately. For a 12-bay project, that means:
Now add segment-specific vacancy and collection loss:
This approach reveals the real story: your "effective gross income" isn't 95% of gross potential — it's more like 72-78%, depending on your mix. That's the number that matters for debt service coverage.
Multifamily proformas treat operating expenses as a percentage of revenue (typically 35-45%). Flex industrial doesn't work that way.
Here's the reality for a 12-bay property:
Notice: $18,200 of $20,600 is fixed — it doesn't change whether you're 50% occupied or 90%. This is why the break-even occupancy for flex industrial is typically 55-65%, not the 35-45% you'd see in multifamily.
Once you have segment-based revenue and fixed-dominant expenses, build the cash flow waterfall month by month for years 1-3:
Critical: Every month in years 1-2 where cash flow is negative must be covered by your operating reserve. If your reserve runs out before you hit break-even, you're foreclosed. Size your reserve to cover 12 months of negative cash flow, not 6.
A proforma without stress tests is a fantasy. Run these scenarios:
If your project fails any stress test, it fails. Go back to the validation framework and either fix the site assumptions or walk away.
This guide shows you what to fix. The 9-module course gives you the spreadsheet — a segment-based proforma with built-in stress testing, cash flow waterfalls, and exit analysis. Plug in your numbers, get real answers.
Segment-based proforma, lease templates, tenant acquisition playbooks. Everything you need to build with confidence.