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Free Rent Burnoff Calculator
Free rent is the top concession tool on commercial leases. The headline number looks painful — six months free on a $30 rent — but amortized over 7-10 years, the NER impact is much smaller. This calculator quantifies concession value, net effective rent, and straight-line recognition.
Free rent value (landlord concession)
$192,000
Total cash rent collected
$2,496,000
Net effective rent / SF / year
$29.71
Straight-line annual rent
$356,571
Burn-off amortization / paying month
$2,462
Effective discount
0.07%
How the math works
Free rent is a front-loaded concession — tenant moves in, pays nothing for X months, then rent starts. Over the lease term, free rent effectively amortizes as a rent discount. Net effective rent (NER) is the per-SF rate a landlord actually collects after free rent and other concessions.
GAAP requires straight-lining free rent. Cash basis follows the payment schedule. Always quote NER when comparing landlord offers with different free rent packages.
How to Use
- Enter contract rent per SF per year and leased SF.
- Enter free rent months and lease term.
- Read free rent value, total cash rent, and NER per SF.
Frequently Asked Questions
Typical free rent?
Office: 1 month per year of term (so 5 years = 5 months free). Retail in soft markets: 2+ months per year. Industrial: usually 0-3 months total. Varies heavily by market and vacancy.
Why amortize straight-line?
GAAP requires smoothing concessions across the full term so monthly rent recognition is even. This creates 'deferred rent' — you recognize rent tenant hasn't paid yet, balanced by a receivable that burns off as actual cash comes in.
Free rent upfront vs spread?
Upfront (months 1-6) is the standard — helps tenants with moving expenses. Spread (every June gets waived) is rare and harder to administer. Always check which structure applies.
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