A free rent period is a negotiated concession in which a tenant is not required to pay rent for a specified initial portion of the lease term, commonly one to several months. Free rent is used both to offset the time a tenant needs for buildout before generating revenue from the space, and as a competitive incentive landlords offer in softer market conditions to win tenants.
How free rent affects effective rent
Free rent lowers a tenant's average effective rent over the lease term by spreading the value of the concession across all months of occupancy. A longer lease term dilutes the impact of a few free months more than a shorter term does, so the value of free rent should always be evaluated relative to the total lease length, not treated as a fixed dollar benefit in isolation.
What to watch for before committing
Timing of the free rent period
Confirm whether free rent applies at lease start, is spread throughout the term, or applies at a different point, since timing affects its practical value.
Interaction with rent commencement
Understand exactly how free rent interacts with your negotiated rent commencement date.
Trade-off against base rent
Recognize that landlords sometimes offer free rent instead of lowering headline base rent — calculate effective rent to compare deals accurately.
NNN obligations during free rent
Confirm whether NNN pass-through charges (taxes, insurance, CAM) are still due during the free rent period, since "free rent" sometimes only waives base rent.
Impact of early termination on free rent
Understand whether free rent value must be repaid if you terminate the lease early.
Documentation in the lease
Ensure free rent terms are explicitly documented in the lease itself, not just discussed verbally during negotiation.
When you need to know this
- Negotiating a new lease — using free rent as a lever alongside base rent and TI allowance in overall deal negotiation
- Comparing competing lease offers — calculating effective rent to accurately compare deals with different free rent structures
- Budgeting cash flow during buildout — planning for reduced early occupancy costs while completing tenant improvements
- Evaluating market conditions — recognizing free rent concessions as an indicator of landlord flexibility in softer markets
Frequently asked questions
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