Effective Rent

Effective Rent Formula and Components

• Face rent: headline base rent per SF in lease document
• Amortized TIA: Total TIA ($/SF) ÷ lease term years
• Amortized free rent: Face rent × free rent months ÷ 12 ÷ lease term years
• Amortized moving allowance: Moving allowance per SF ÷ lease term years
• Amortized other concessions: Any additional concessions (signage, rent abatement, fit-out by landlord) ÷ lease term
• Effective Rent = Face rent − Sum of all amortized concessions
• Net Effective Rent (NER): alternative formulation using NPV; net of operating expenses (for full-service comparison)

Florida Effective Rent Discount Benchmarks

• Office Class A urban: typically 15–25% effective rent discount to face on 10-year leases (mix of TIA + free rent + concessions)
• Office Class A suburban: 12–22% discount
• Office Class B: 10–18% discount
• Medical office: 20–35% discount (high TIA drives larger discount)
• Industrial Class A bulk: 4–8% discount (lower TIA)
• Industrial flex: 6–12% discount
• Retail inline: 8–18% discount depending on use and TIA
• Retail restaurant: 15–25% discount (higher TIA for kitchen/HVAC)
• Life sciences/lab: 30–55%+ discount (very high TIA)

How Lenders Use Effective Rent

Effective rent is the standard underwriting input for institutional CRE lenders:

• CMBS: underwrite NOI using effective rent on all material tenant leases — discounts to face often material to refinance proceeds
• Bank: stabilized loans typically use effective rent; sometimes blend with face rent for short-term debt
• Agency multifamily: N/A (residential leases typically don't include material concessions beyond move-in specials)
• Life-company: uses effective rent for long-duration loans
• Refinance proceeds impact: 20% effective rent discount to face on a $5MM NOI property at 6% cap = $1MM valuation difference = $750K refinance proceeds difference at 75% LTV
• Marking to market: sophisticated investors mark in-place leases to current market effective rent (not market face rent) for valuation

What is effective rent in commercial real estate?

Effective Rent (also called Net Effective Rent) is face rent minus the amortized value of all lease concessions — free rent, Tenant Improvement Allowance (TIA), moving allowance, and other landlord concessions — over the lease term. A $35/SF face rent on a 10-year lease with $60/SF TIA + 4 months free rent has effective rent of approximately $27.83/SF. CMBS and bank lenders underwrite to effective rent rather than face rent.

How is effective rent calculated?

Effective Rent = Face rent − Amortized TIA − Amortized free rent − Amortized other concessions. Amortized TIA = Total TIA ($/SF) ÷ lease term years. Amortized free rent = Face rent × free rent months ÷ 12 ÷ lease term years. Example: $35/SF face rent on 10-year lease with $60/SF TIA + 4 months free rent. Amortized TIA = $6.00/year. Amortized free rent = $1.17/year. Effective rent = $35 − $6 − $1.17 = $27.83/SF/year.

How much is effective rent typically discounted from face rent in Florida?

Florida effective rent discount to face varies by asset class: office Class A urban 15–25%, suburban 12–22%, Class B 10–18%; medical office 20–35% (high TIA); industrial bulk 4–8% (low TIA); industrial flex 6–12%; retail inline 8–18%, restaurant 15–25%; life sciences/lab 30–55%+ (very high TIA). The gap between face and effective rent is one of the most material yet under-analyzed variables in FL CRE leasing.

Why do lenders use effective rent instead of face rent?

Lenders use effective rent because it reflects the actual economic yield to the landlord — not the artificially inflated face rent that ignores concession cost. A property with $35/SF face rent and 20% effective rent discount produces 20% less actual rental revenue than a face-rent comparison would suggest. CMBS, bank, and life-company lenders underwrite NOI using effective rent on all material tenant leases — making effective rent material to refinance proceeds and exit cap rate analysis.

Who can analyze effective rent on Florida commercial leases?

Michael R. Linton and Linton Global Solutions analyze effective rent on every Florida CRE leasing transaction — landlord-side and tenant-side — and on every acquisition lease abstract review. 39 years of Florida CRE transaction experience and active relationships with FL leasing brokers and tenant fit-out specialists produces effective rent analysis that exposes the actual economic terms of every lease. Call (312) 612-1031.

Article Summary

Effective Rent (Net Effective Rent) = Face rent − Amortized TIA − Amortized free rent − Amortized other concessions. Normalizes lease comparisons across different concession structures. FL discount benchmarks: office A urban 15–25%, suburban 12–22%, Class B 10–18%; medical office 20–35%; industrial bulk 4–8%, flex 6–12%; retail inline 8–18%, restaurant 15–25%; life sciences 30–55%+. CMBS, bank, life-company lenders underwrite to effective rent — material to refinance proceeds and valuation.

Key Takeaways

• ✓Effective Rent = Face rent − Amortized TIA − Amortized free rent.
• ✓FL office Class A effective rent discount typically 15–25% of face.
• ✓Medical office and life sciences: 20–55%+ discount (high TIA).
• ✓CMBS and bank lenders underwrite to effective rent, not face.
• ✓20% discount on $5MM NOI = $1MM valuation difference at 6% cap.

About Michael R. Linton

Michael R. Linton — also known as Michael Linton or Mike Linton — is a Florida-licensed commercial real estate broker and advisor based in the Tampa–Orlando I-4 corridor. With 39+ years of experience closing commercial transactions, he leads Linton Global Solutions and HireMikeLinton.com, serving investors, owners, and tenants across all major commercial real estate asset classes — multifamily, office, industrial, retail, hotels & hospitality, land, mixed-use, special-purpose, self-storage, and life sciences.

Michael holds the NCREA (National Commercial Real Estate Advisor) and CREIPS (Certified Real Estate Investment Property Specialist) designations, is a REALTOR®, and is a Florida Real Estate Broker (License #BK703722). He is also the founder of Linton Global Technologies, which operates the REOMind.ai AI-powered REO disposition platform serving 500+ banks.

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Works Cited

1. BOMA International. "BOMA Office Experience Exchange Report." BOMA, https://www.boma.org/. Accessed Jun 9, 2026.
2. NAIOP. "CRE Lease Concession Trends." NAIOP, https://www.naiop.org/. Accessed Jun 9, 2026.
3. CoStar Group. "Florida Office and Retail Analytics." CoStar, https://www.costar.com/. Accessed Jun 9, 2026.
4. CRE Finance Council. "CMBS Underwriting Standards." CREFC, https://www.crefc.org/. Accessed Jun 9, 2026.

Disclosure & Compliance

Disclosure: This article discusses proprietary technology developed by Linton Global Technologies. Michael R. Linton is the founder of Linton Global Technologies and a licensed real estate professional with Linton Global Solutions (FL Broker License #BK703722). This content is for informational purposes only and does not constitute investment, legal, or financial advice.

Compliance Statement: All CREDDS and REOMind.ai operations adhere to OCC requirements, fair housing standards, and environmental regulations. Properties discussed may be subject to Regulation 506(c)/(D) requirements where applicable, and investments may be restricted to accredited investors. Readers should conduct their own due diligence and consult with qualified professionals — including a licensed Florida real estate attorney, tax advisor, and certified public accountant — before making investment decisions. Past performance does not guarantee future results.