The distinction between asking rent and effective rent is one of the most important concepts for accurately comparing industrial lease offers. Asking rent is the landlord's initially quoted, negotiable starting figure, while effective rent reflects the average rent actually paid over the lease term after accounting for concessions like free rent and TI allowance.
Why the gap between the two matters
Two buildings with identical asking rent can have meaningfully different effective rent once concessions are factored in, and conversely, a building with higher asking rent but stronger concessions might actually cost less than a lower-asking-rent building with no concessions. Comparing lease offers based on asking rent alone is one of the most common and costly mistakes tenants make during site selection.
What to watch for before committing
Always calculate effective rent before comparing
Never compare competing offers based on asking rent alone — always calculate effective rent accounting for all concessions.
Consistent lease term for comparison
Ensure you're calculating effective rent over the same lease term length when comparing multiple offers.
Full concession package inclusion
Include all concessions — free rent, TI allowance, and any other negotiated benefits — in your effective rent calculation, not just the most obvious ones.
NNN pass-through consistency
Ensure you're comparing effective rent on a consistent basis (NNN, gross, etc.) across all competing offers.
Broker-provided effective rent verification
Ask brokers to show their effective rent math explicitly rather than taking a quoted comparison at face value.
Renewal term implications
Recognize that concessions typically apply only to the initial lease term, so factor in how rent might reset at renewal.
When you need to know this
- Comparing multiple competing lease offers — using effective rent as the accurate basis for comparison, not asking rent
- Negotiating a new lease — understanding how concessions affect the true cost versus the headline asking figure
- Evaluating broker or landlord marketing materials — critically assessing rent figures presented in property marketing
- Budgeting true occupancy cost — calculating your actual expected average cost over the lease term
Frequently asked questions
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