1. What is Effective Rent?

Effective rent is the actual rental rate considering all concessions and incentives spread over the lease term. It provides a more accurate measure of the true cost of leasing space than the base rent alone.

2. How Does the Calculator Work?

The calculator uses the effective rent equation:

Where:

• \( Base \) — Base rental rate (currency)
• \( Incentives \) — Total value of concessions (currency)
• \( Term \) — Lease duration (time units)

Explanation: The equation accounts for all financial incentives and spreads them evenly across the lease term to determine the true rental rate.

3. Importance of Effective Rent Calculation

Details: Calculating effective rent helps tenants compare lease offers and landlords evaluate the true financial impact of concessions. It's essential for accurate financial planning and lease comparisons.

4. Using the Calculator

Tips: Enter base rent in currency, incentives in currency, and term in time units. All values must be valid (positive numbers).

5. Frequently Asked Questions (FAQ)

Q1: What's included in incentives?
A: Incentives may include free rent periods, tenant improvement allowances, moving expenses, or other financial concessions.

Q2: How does term length affect effective rent?
A: Longer terms typically result in lower effective rents as incentives are spread over more periods.

Q3: Should effective rent include operating expenses?
A: For full service leases, yes. For net leases, operating expenses are typically calculated separately.

Q4: How does this compare to net effective rent?
A: Net effective rent further adjusts for present value by discounting future cash flows.

Q5: When is effective rent most useful?
A: Most valuable when comparing lease options with different concession structures or term lengths.