FREE RENT CONCESSION

The Pros and Cons of Free Rent Concessions

In a hurry:

Apply it today:

  • Owner agrees to waive or forfeit rent due as an incentive for a new tenant

  • Deduction against potential base rental revenue

By the end of this video you’ll learn:

  • What is Free Rent?

  • How is it used?

  • Impact it has on NOI and valuation

  • Discuss Free Rent vs. Tenant Improvement Allowance

 

Have a few minutes:

 

Tenants like free rent. Let’s be honest, who doesn’t enjoy getting something for free?

 

When the market is “cold” (tenant-friendly, contracting, high supply, etc.), a tenant can demand more free rent. When the market is “hot” (owner-friendly, expanding, low supply, etc.), a tenant may not receive any free rent.

 

But, as in most things in life, there’s a catch. Owners will use free rent to encourage a new tenant to lease in their building. They may also adjust other lease terms (rate, escalations, lease term, guarantee, etc.) to make up for the lose revenue.

 

In this episode we explore how owners use free rent to entice more tenants. We also explore the impact free rent has on income and value and how it compares to other concessions.

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