Property management & leasing
Rent Concession: Definition & Example
What Is a Rent Concession?
A rent concession is a discount or incentive a landlord offers to attract or keep tenants, such as a free month of rent, reduced rent for a period, or waived fees.
What does rent concession mean?
Concessions let landlords compete without lowering the stated rent. A common example is "one month free on a 13-month lease." The face rent stays the same, which keeps the rent roll and future renewals higher, while the tenant’s actual cost goes down.
Because of this, analysts look at net effective rent, which is the average monthly rent after spreading concessions across the lease term. Concessions rise when vacancy is high or new supply hits the market.
Concessions should be written into the lease so both sides know how and when they apply and what happens if the tenant breaks the lease early.
Rent concession example
A new building offers eight weeks free on a 14-month lease at $2,000 per month. The tenant pays about $28,000 total instead of $32,000 in face rent. Spread over 14 months, the net effective rent is about $1,786 per month.
Related terms
- Market RentMarket rent is the amount a rental unit would likely lease for today on the open market, based on comparable units nearby with similar size, condition, and amenities.
- Vacancy RateVacancy rate is the percentage of rental units in a property or market that are empty and available at a given time, or the share of potential rent lost to vacancy.
- Lease AgreementA lease agreement is a contract between a landlord and tenant that sets the rent, the term, and the rules each side must follow while the tenant occupies the property.
- Rent RollA rent roll is a report that lists every unit in a property with its tenant, rent, lease dates, deposits, and balance due, giving a snapshot of the property’s rental income.
Rent concession FAQ
- What is net effective rent?
- Net effective rent is the average monthly rent after concessions. Divide the total rent actually paid over the lease by the number of months.
