effective rent
What is blended rent versus effective rent?
What is blended rent versus effective rent?
Blended rent is a simple average of the years. Effective rent should still say whether waiting was priced.
This page belongs to a validation / pilot concept. It is not generally available. Payment is not collected.
Questions this page also answers
What does this page answer?
Blended rent is a simple average of the years. Effective rent should still say whether waiting was priced.
What should sit beside it?
The nearby owner page and one worked walk.
What is not answered here?
A legal read and a location vote.
What is the next step?
Open the related compare or model page and keep the same rate.
Plain-language definition
Blended rent adds the years and divides.
Effective rent may also shrink early credits more.
The words get swapped in broker decks.
Write the method next to the number.
Do not treat them as twins.
This page sits under Effective rent.
Need the next step? Open What is effective rent?.
See Simple vs NPV-adjusted when you want the nearby walk.
Open How to calculate it if this page is not the last step.
Investopedia defines net present value as later cash brought back to today. See Investopedia on NPV.
Why it matters
A simple average hides that year-one free rent is worth more.
Clients hear both words and think they already compared.
Finance will ask which recipe you used.
The two methods can rank two offers differently.
How it works
- Build one cash list.
- Compute the simple average.
- Compute the NPV-adjusted yearly number if you use it.
- Label both.
- Keep the rate visible on the adjusted path.
Formula in words. Blended rent = sum of yearly cash ÷ years.
| Input | Meaning |
|---|---|
| Start rent | First-year rent before extras |
| Extras | CAM, tax, or insurance the tenant still pays |
| Credits | Free rent or build-out money |
| Term | How many years the cash list runs |
| Discount rate | How hard later cash is shrunk |
Worked example
Here is a teaching sample. It is not customer data and not a result from a live client.
| Metric | Path A | Path B |
|---|---|---|
| Start rent | $40,000 | $37,200 |
| Year-1 extras | $7,400 | $7,918 |
| Year-1 credit | $16,000 | $8,800 |
| Sample NPV | $343,062 | $332,500 |
| Year | Rent | Extras | Credit | Cash out | Value today |
|---|---|---|---|---|---|
| Year 1 | $40,000 | $7,400 | $16,000 | $31,400 | $29,074 |
| Year 2 | $41,200 | $7,622 | $0 | $48,822 | $41,857 |
| Year 3 | $42,436 | $7,851 | $0 | $50,287 | $39,919 |
| Year 4 | $43,709 | $8,086 | $0 | $51,795 | $38,071 |
| Year 5 | $45,020 | $8,329 | $0 | $53,349 | $36,308 |
| Year 6 | $46,371 | $8,579 | $0 | $54,950 | $34,628 |
| Year 7 | $47,762 | $8,836 | $0 | $56,598 | $33,024 |
| Year 8 | $49,195 | $9,101 | $0 | $58,296 | $31,496 |
| Year 9 | $50,671 | $9,374 | $0 | $60,045 | $30,037 |
| Year 10 | $52,191 | $9,655 | $0 | $61,846 | $28,647 |
| Sample NPV | — | — | — | — | $343,062 |
Sample NPV for Blended-versus-effective sample is about $343,062. A second path lands near $332,500.
Year 1 of Blended-versus-effective sample has rent of $40,000.
Shared building cost is $7,400.
A credit of $16,000 lowers the cash you pay that year.
Cash out this year is about $31,400. Year one carries the Blended-versus-effective sample credit.
Later cash gets a shrink for time. At 8 percent, year 1 is worth about $29,074 today.
Next, year 2 rent is $41,200.
Assumptions
- The Blended-versus-effective sample uses one visible 8 percent rate.
- Credits hit in year one unless the page says otherwise.
- Both options share the same extra basis.
- No percentage rent sits in this teaching walk.
Edge cases
A mid-year start needs a stub period, not a fake full year.
A credit that pays later must move to that later year.
A cap on extras changes the later risk, not the first sticker.
Common mistakes
- Calling a simple average effective rent without saying so.
- Mixing methods across options.
- Hiding the term.
- Dropping extras on a net path.
Decision implications
Blended rent is a simple average of the years. Effective rent should still say whether waiting was priced.
If the gap is thin, show a second rate before anyone picks.
If one path wins only from a mistimed credit, rebuild the list.
This page answers one question. Nearby pages cover the next step.
See What is effective rent? when you need that next step. Open Simple vs NPV-adjusted for the nearby walk. Use How to calculate it if you want a second path.
Limits
- The number does not score daylight, transit, or floor plate.
- The number does not replace a legal read.
- Do not let one metric pick a space the team cannot use.
- Do not use this page as a clone of a nearby question.
U.S. BLS describes how brokers advise clients on property deals. See BLS broker occupation data.
Next step
This site is a validation / pilot concept. It is not generally available. Payment is not collected.
Ready for a bounded next step? Request Pilot Access or see how it works and compare commercial leases.
Effective rent vs NPV: what is the difference? · How do you calculate effective rent? · What is the difference between effective rent and face rent? · What is effective rent per square foot? · What are common effective rent mistakes? · What is effective rent in a commercial lease? · What is the difference between effective rent and asking rent? · Does effective rent work the same on gross and net leases?
Trusted sources
These are public references. They are not endorsements and not client results.