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Net Effective Rent Calculator

Work out net effective rent instantly with clear inputs, formula shown and shareable results.

About Net Effective Rent Calculator

Net effective rent is the level rent whose present value equals the present value of the actual cash flow. Each month of face rent after the free period is discounted, and the total is divided by the annuity factor for the term. Unlike a simple average it accounts for the time value of the concession, which is why leasing teams use it to compare unequal deals.

Formulas

Net effective rent

NER = NPV of actual rent / annuity factor for the term

Monthly discount rate

r = (1 + annual rate)^(1/12) - 1

Worked example

With the default values below, Net Effective Rent Calculator returns Net effective rent of $78.260. Change any input above and every figure here is recalculated in your browser.

Inputs used

Face rentminimum 0 per ft² per month
85 per ft² per month
Lease termaccepts 1–1,200 months
60 months
Rent free monthsminimum 0 months
4 months
Annual discount rateaccepts 0–30 %
8 %

Results

Net effective rent
$78.260
Present value of rent per ft²
$3,885.22
Annuity factor
49.6449
Discount to face rent
7.93% %

Step by step

  1. 1Values used
  2. 2Net effective rent
  3. 3Monthly discount rate
  4. 4Net effective rent= 78.260
  5. 5Present value of rent per ft²= 3,885.22
  6. 6Annuity factor= 49.6449
  7. 7Discount to face rent= 7.93 %

Assumptions and limits

  • The result is derived only from the 4 inputs listed above. Anything not among them is not part of the calculation.
  • In particular, this calculator does not take inflation, tax or fees or charges into account.
  • Figures are rounded for display to 4 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Frequently Asked Questions

How is the Net Effective Rent figure worked out?

NER = NPV of actual rent / annuity factor for the term. Net effective rent is the level rent whose present value equals the present value of the actual cash flow.

Why does the discount rate matter?

A higher rate makes an early concession relatively cheaper for the landlord, so it raises the net effective rent. Comparing deals requires the same rate applied to both.

What values do I need to enter?

This calculator takes 4 inputs: Face rent, Lease term, Rent free months, Annual discount rate. The pre-filled defaults are a realistic worked example — replace them with your own site or project figures.

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