Effective Rent 2015-11-10 08:00:00

Effective Rent

Net rental income received by landlord from a lease after deducting the value of concessions and costs incurred to secure the lease such as leasing commissions and tenant improvements.

For instance, if a tenant signed a 5 year lease for $20/sf per year, but received a $10/sf tenant improvement allowance and five months free rent, the effective rent would be $16.33/sf ($20 / 12 months = $1.67/month x 5 months free = $8.33 plus $10/sf tenant improvement allowance = $18.33/sf total cost to landlord. $18.33 / 5 year lease = $3.67 per year deduction from the face rate of $20/sf = $16.33/sf effective rent).


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