Net Effective Rent (Lease Concessions)
The rate a tenant actually pays after the free rent is buried.
Example
You enter
- Face (base) rent ($/period, e.g. $/SF/yr) 40
- Lease term (periods) 120
- Free-rent periods 10
You get
- Net effective rent $36.67 per period
- Discount off face 8.3% below face
Checked against published worked examples from: Wall Street Prep.
Details, formula, and sources
ScopeLandlords quote a high FACE rent and bury months of free rent and TI credits, so the term-sheet number is not the number to compare between offers. paid = face x (term - free); NER = (paid - one-time credit) / term; discount = (1 - NER/face). A $40 face per period over 120 periods with 10 free pays 110 x $40 = $4,400 -> $36.67 per period, an 8.3% discount off face (Wall Street Prep: $4,000/month, 12 months, 2 free -> $3,333); a five-year lease with several months free can run 10-20% below face. Straight-line (undiscounted) average, the broker convention -- not a present-value effective rent. A comparison aid; the executed lease governs.
Formula or tablepaid = face_rent x (term - free_periods); NER = (paid - one_time_credit) / term; total_saving = face x term - (paid - credit); discount_pct = (1 - NER / face) x 100.
Source and editionNet effective rent (straight-line concession spread), per the Appraisal Institute income approach and standard commercial-lease concession practice, by name; the executed lease governs.
Free accessSpreading lease concessions straight-line to an effective rent is a standard commercial-real-estate calculation; the face rent, term, and concessions come from the lease proposal.
What governsEstimate. AHJ and licensed professional govern.
API field namesface_rent, term_periods, free_periods, ner, discount_pct
- Face vs effective face is the quoted rate; net effective is after free rent and credits are spread over the termcommercial-lease practice
- Straight-line a straight-line average, not a present-value effective rentbroker convention
- Excludes ignores escalations and operating-expense pass-throughsscope of this tile