What is net effective rent?

Net effective rent is a term commonly used in the real estate industry to refer to the actual amount of rent that a tenant pays after factoring in any concessions, discounts, or incentives offered by the landlord. This can include things like free rent periods, rent abatements, or tenant improvement allowances.

Calculating the net effective rent can provide a more accurate picture of the true cost of leasing a property for a tenant. It allows tenants to compare different lease options and understand the actual out-of-pocket expenses they will incur.

For example, if a landlord offers a free rent period of two months on a one-year lease, the net effective rent would be calculated by subtracting the value of the free rent from the total annual rent and then dividing by 12 to get the monthly rent amount.

In summary, net effective rent provides a clearer understanding of the financial implications of leasing a property and can help tenants make more informed decisions when negotiating lease terms.