Guide to Using the Free Rent Calculator

6 Pages Posted: 12 Jan 2021

See all articles by Peng Liu

Peng Liu

Cornell University - S.C. Johnson College of Business - School of Hotel Administration

Luoyi Su

affiliation not provided to SSRN

Jan deRoos

affiliation not provided to SSRN

Date Written: Feburary 1, 2014

Abstract

In this step-by-step guide, we will show you how to use the Free Rent Calculator, which provides an accurate, visual means to quantify the impact of concessions in commercial leases based on the market conditions and landlord’s risk profile. The calculator allows both landlords and tenants to benchmark the impact of free rent, tenant improvements, and moving allowance on a given set of the asking and offering rents. The calculator determines the resulting effective rent, which is equivalent to the tenant paying a constant base rent over the entire lease term. The effective rent serves as a comparison benchmark, allowing users to quickly see the impact of changes to the asking rent and concession package. The tool works by allowing users to specify the structure of the rental payments, tenant improvements (TIs) and the moving allowance, and then computes the maximum free rent period in light of the specified lease terms and concessions.

Landlords can use the tool to fine-tune the concession package by determining the appropriate level of free rent that seems attractive without increasing exposure to tenant default. Tenants can use the tool to optimize the free rent and concession structure to create the most desirable pattern of monthly cash outflows from the available options.

Keywords: free rent, concessions, commercial lease

Suggested Citation

Liu, Peng and Su, Luoyi and deRoos, Jan, Guide to Using the Free Rent Calculator (Feburary 1, 2014). Available at SSRN: https://ssrn.com/abstract=3743068 or http://dx.doi.org/10.2139/ssrn.3743068

Peng Liu (Contact Author)

Cornell University - S.C. Johnson College of Business - School of Hotel Administration ( email )

448 Statler Hall
Ithaca, NY 14853
United States
6072542960 (Phone)

Luoyi Su

affiliation not provided to SSRN

Jan DeRoos

affiliation not provided to SSRN

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