Rent Free Impact
Calculate the effective rent after a rent-free period or other incentive.
Introduction
Who this is for: Landlords, tenants and investors assessing the real value of a lease with incentives.
Why it matters: Headline rent is a negotiating fiction when incentives are involved. A £100,000 rent with 12 months free on a 5-year term is really £80,000. Valuers and buyers look through to the effective rent.
Typical scenario: A 10-year lease with a break at year 5, headline rent £100,000, with 12 months rent-free and a £50,000 fit-out contribution.
- Valuing an asset on headline rent when a long rent-free period has been given.
- Forgetting that a fit-out contribution is economically the same as more rent-free.
- Amortising over the full term when there is a break — spread it to the break instead.
Inputs
Lease Terms
years
Incentives
months
months
Analysis
A headline rent of £100,000 with 12 months rent-free and a £50,000 contribution, spread over 5 years, gives an effective rent of £70,000 — 30.0% below headline.
This analysis provides context, not financial advice. Consult a qualified adviser before making investment decisions.
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Live Results
Effective Rent
£70,000
Discount to Headline
30.00%
Total Incentive Value
£150,000
Total Rent Over Term
£350,000