Free tool and guide
Net effective rent calculator what a lease really pays
Face rent is not what a lease pays. Enter the rent, escalations, free months, TI and commissions below to compare offers on the same basis.
Net effective rent is what a lease pays per year after concessions, averaged over its term. Take the total rent due, subtract free rent, tenant improvements and leasing commissions, and divide by the years in the lease.
Net effective rent calculator
Enter the starting rent, escalation, term and concessions to get the net effective rent per square foot. It runs in your browser: your numbers are not uploaded, saved or tracked, and there is no sign-up.
Showing invented example numbers
- Net effective rent
- $33.21 per SF per year
- After free rent, TI and commissions, no discounting
- After free rent only
- $39.81 per SF per year
- Average face rent
- $42.47 per SF per year
- Net effective, monthly
- $13,836
- For the area entered
Worth a look
- Free rent gives up $13.33 per SF over the term.
Arithmetic only, with no market benchmarks. This is not a loan quote or advice.
The net effective rent formula
Net effective rent = (total scheduled rent - free rent - tenant improvements - commissions) / lease term in years. This calculator applies escalations once per lease year, and takes free rent from the first months. It does not discount for the time value of money, so treat it as a comparison tool.
A worked example
A five-year lease starts at $40 per square foot with 3% annual bumps, four months free, $25 of TI and $8 of commissions. The average face rent is $42.47 per SF per year. After free rent it is $39.81 per SF per year, and after TI and commissions, $33.21 per SF per year.
Comparing two offers
A higher face rent with heavy concessions can pay less than a lower face rent with light ones. Run both through the calculator with the same area. A tenant and a landlord will count different items, though: a tenant cares mostly about free rent and TI, while commissions are the landlord's cost.
For long leases or high concessions, discount the cash flows as well, since a dollar in year five is worth less than one today. Timing is why a landlord may prefer free rent later, and a tenant earlier.
Check what the rent covers
Net effective rent only compares like with like. A gross rent includes expenses that a triple-net rent leaves the tenant to pay, so put offers on the same basis first. The CAM calculator can help estimate those costs.
Frequently asked
- How do you calculate net effective rent?
- Add up the rent due over the term, subtract free rent and other concessions, and divide by the years in the lease.
- Is net effective rent the same as face rent?
- No. Face rent is the stated rate. Net effective rent is what remains after concessions, spread over the term.
- Should TI be included in net effective rent?
- Landlords usually include it, because it is their cost. Tenants may leave it out if the allowance only covers work they must do anyway. Be consistent across offers.
Keep reading
CAM reconciliation calculator
A tenant's share of CAM, gross-up, and the year-end balance.
Rent roll analyzer
Occupancy, loss to lease, rollover and concentration from a rent roll.
Equity multiple calculator
Equity multiple and IRR from a stream of cash flows.
Pacific Software Ventures built this tool and guide, and sells AI consulting and training to commercial real estate firms. This is general education, not investment, legal or tax advice.
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