Net Effective Rent Calculator — True Lease Cost After Concessions
Landlords often offer free rent periods and tenant improvement allowances (TIA) to attract tenants, while quoting a higher "headline" rent. Net effective rent (NER) amortises these concessions over the full lease term so you can compare deals with different face rents and incentive packages on an equal footing.
months
Blended monthly cost after spreading all concessions over the full lease term
- 1
Paying months
24 − 2 = 22 - 2
Total rent paid
5,000 × 22 = 110,000 - 3
Net cash outflow
110,000 − 0 = 110,000Total rent paid minus the tenant improvement allowance received from the landlord. - 4
Net effective rent
110,000 ÷ 24 = 4,583
How does this calculator work?
Net effective rent = (Face rent × Paying months − TIA) / Total months. Paying months = lease term minus free-rent months. NER lets you compare leases with different headline rents and concession packages on a single monthly number. It does not include rent escalation or tax effects.
Formula
How this is calculated
A commercial lease may quote a face (headline) rent of, say, $5,000/month on a 24-month term but offer 2 months free at the start plus a $20,000 TIA. In those 24 months the tenant actually pays rent for only 22 months ($110,000 total) and receives a $20,000 allowance, making the net cash outflow $90,000. Spread over 24 months, the NER is $90,000 / 24 = $3,750/month — $1,250 less than the headline rate. NER is the metric that lets you compare this deal directly with a different lease that has a lower face rent but no concessions.
This calculator uses the most common NER definition: (Face rent × Paying months − TIA) / Total lease months. The TIA is treated as a one-time cash inflow at lease commencement, not amortised. Alternative definitions used by some brokers and landlords capitalise the TIA at an assumed cost of capital; this calculator uses the simpler gross-cash approach which is standard in the CBRE/JLL brokerage market.
Note that NER does not account for rent escalation clauses (stepped rents), which would require a discounted-cash-flow calculation. If your lease has annual rent reviews or CPI-linked increases, the true effective cost is higher than this flat-rate NER. NER also ignores tax effects — the tax treatment of TIA payments varies by jurisdiction and should be confirmed with a tax adviser.
Frequently asked questions
Convert both to NER. For each deal compute NER = (Face rent × Paying months − TIA) / Total months. The lease with the lower NER is cheaper on a like-for-like monthly basis, assuming the same term. If the terms differ, also compare total cash outflows over the respective lease periods.
In most jurisdictions a TIA received from a landlord is either treated as a non-taxable lease incentive that reduces the cost basis of the leasehold improvement, or as ordinary income. Tax treatment depends on how the allowance is structured and local rules — for example, US GAAP and IFRS 16 have specific guidance. Consult a qualified accountant before signing.
Yes, when there are any concessions (free rent or TIA > 0). If both free months and TIA are zero, NER equals face rent exactly. NER can never exceed face rent under the standard formula — it only moves in the tenant's favour as concessions increase.
Also known as
TG we-Calculate Editorial Team. (2026). Net Effective Rent Calculator — True Lease Cost After Concessions [Online calculator]. TG we-Calculate. https://we-calculate.com/calculator/net-effective-rent-calculator
TG we-Calculate Editorial Team. "Net Effective Rent Calculator — True Lease Cost After Concessions." TG we-Calculate. 2026. https://we-calculate.com/calculator/net-effective-rent-calculator.
TG we-Calculate Editorial Team, "Net Effective Rent Calculator — True Lease Cost After Concessions," TG we-Calculate, 2026. [Online]. Available: https://we-calculate.com/calculator/net-effective-rent-calculator
@misc{wecalculate_net_effective_rent_calculator, title = {Net Effective Rent Calculator — True Lease Cost After Concessions}, author = {{TG we-Calculate Editorial Team}}, howpublished = {\url{https://we-calculate.com/calculator/net-effective-rent-calculator}}, year = {2026}, note = {TG we-Calculate} }
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