Concession Modeling in Commercial Real Estate: Effective Rent Calculation, Burn-Off Analysis, and Valuation Impact

Key Takeaways

What Rent Concessions Are

A rent concession is any benefit a landlord provides to a tenant that reduces the landlord's economic return below the stated face rent. Concessions are negotiated as part of the lease transaction and can take many forms: months of free rent, reduced rent during an initial period, cash bonuses paid at move-in, tenant improvement allowances, or waived fees. The common thread is that each concession represents a cost to the landlord that erodes the spread between face rent and the actual cash the landlord collects over the lease term.

Concessions are not rent reductions. A rent reduction lowers the contractual face rent for the remaining lease term. A concession leaves the face rent intact and provides a separate inducement that reduces the landlord's effective economic return. This distinction matters for three reasons. First, face rent drives lease escalation calculations. A lease with $2,000/month face rent and 3% annual escalations will escalate from the $2,000 base, regardless of whether the tenant received two months of free rent at signing. A rent reduction to $1,800/month would escalate from the lower base, compounding the landlord's loss over the lease term. Second, face rent is what comparables databases record. Brokers, appraisers, and comp services report face rents, not effective rents. A property that appears to command $2,000/month rents may actually be collecting $1,833/month on an effective basis after one month free on a 12-month lease. Third, face rent is what lenders see on the rent roll. A lender who underwrites to face rent without adjusting for concessions will overstate the property's debt service coverage ratio and may approve a loan the property cannot support.

In multifamily, concessions are most prevalent during lease-up of new construction, in markets with elevated vacancy rates, and during seasonal demand troughs (typically November through February in most U.S. markets). As ArborCrowd's learning center on multifamily concessions explains, concessions are the landlord's primary tool for maintaining occupancy without permanently lowering asking rents. The logic is straightforward: a one-month free rent concession on a 12-month lease costs the landlord 8.3% of annual gross rent. A vacant unit costs 100% of monthly rent for every month it sits empty. If the concession fills the unit three or four weeks faster than it would lease without the concession, the landlord breaks even or comes out ahead on a net basis.

In commercial real estate (office, retail, industrial), concessions are part of a broader deal structure that includes tenant improvement allowances, free rent periods, reduced rent periods, and leasing commissions. The institutional convention is to evaluate the full concession package as a single economic unit and compute the landlord's net effective rent after accounting for all concession costs. This is the standard that institutional investors, CMBS lenders, and appraisers use to value income-producing properties. Face rent is the headline. Effective rent is the economics.

Concession Taxonomy

Not all concessions are equivalent. Each type has a different cash flow profile, a different amortization method, and a different impact on the pro forma. Treating all concessions as interchangeable produces incorrect effective rent calculations and misleading valuation conclusions. The following taxonomy covers the six primary concession types encountered in institutional underwriting, along with the modeling convention for each.

1. Free Rent (Rent Abatement)

Free rent is the most common concession in both multifamily and commercial leasing. The tenant occupies the space and pays no base rent for a specified number of months, typically at the beginning of the lease term. The face rent remains unchanged for all other months. Free rent periods range from one month (common in multifamily) to six or twelve months (common in Class A office leases with long terms).

Modeling convention: straight-line the free rent cost over the full lease term. If a 12-month multifamily lease includes one month free, the annual concession cost is one-twelfth of the annual face rent. If a 10-year office lease includes six months free at $55/SF, the annual concession cost is ($55 x 6 months / 12) / 10 years = $2.75/SF/year. The straight-line method is the GAAP standard under ASC 842 and is the convention used by institutional underwriters and appraisers.

2. Reduced Rent (Stepped Rent)

Reduced rent concessions lower the face rent for an initial period, after which the rent steps up to the full contractual rate. Unlike free rent, the tenant pays something during the reduced period, but less than the stated face rent. A common structure in multifamily is "first three months at $1,500, then $2,000/month for the remaining nine months." In commercial leases, stepped rent structures may offer below-market rent for the first two or three years of a long-term lease, with the rent stepping up to market or above-market levels in later years.

Modeling convention: compute the total rent shortfall during the reduced period (face rent minus reduced rent, multiplied by the number of reduced months), then straight-line that total shortfall over the full lease term. For GAAP purposes, the straight-line rent is the average monthly payment over the lease term, and the difference between the straight-line rent and the actual payment in any given month is recorded as a deferred rent asset or liability.

3. Move-In Bonus (Cash Concession)

A move-in bonus is a lump-sum cash payment from the landlord to the tenant at lease signing or move-in. Move-in bonuses are more common in multifamily than in commercial leasing. The amounts are typically small relative to the total lease value: $500 to $2,000 for a multifamily unit, covering moving costs, first month's utilities, or a gift card. In competitive markets, move-in bonuses can reach one month's rent.

Modeling convention: straight-line the cash amount over the lease term. A $1,200 move-in bonus on a 12-month lease adds $100/month to the landlord's concession cost. The effective rent is face rent minus the straight-lined bonus. Some operators prefer to treat the move-in bonus as a marketing expense rather than a rent concession, but the economic effect is the same: it reduces the landlord's net cash flow from the lease.

4. Tenant Improvement Allowance (TI)

The tenant improvement allowance is a capital contribution by the landlord toward the buildout or renovation of the leased space. TI is standard in commercial leasing and ranges from $5/SF for industrial space to $100+/SF for Class A office. TI differs from the other concession types in a critical way: it represents a capital investment, not a revenue reduction. The landlord deploys cash at lease commencement and recovers the investment through the rental stream over the lease term.

Modeling convention: amortize the TI at the landlord's cost of capital over the lease term. The annual amortization charge is deducted from face rent to arrive at effective rent. The amortization uses the landlord's cost of capital (typically 6% to 8%), not simple straight-line division, because the TI represents a time-zero capital outlay. At 7% cost of capital, $75/SF TI amortized over 10 years produces an annual charge of $10.68/SF, not $7.50/SF as simple division would suggest. The $3.18/SF difference is the landlord's financing cost on the TI capital.

5. Waived Fees

Fee waivers cover application fees, amenity fees, pet deposits, parking fees, storage fees, or other ancillary charges that the landlord normally collects. In multifamily, waived application and amenity fees are common during lease-up. In commercial leasing, waived parking fees or signage rights function as concessions.

Modeling convention: quantify the total value of waived fees over the lease term and straight-line the amount. In practice, fee waivers are often excluded from the formal effective rent calculation because the amounts are small relative to base rent. However, at scale (a 300-unit multifamily property waiving $500 in application and amenity fees per unit), the aggregate concession cost is $150,000. An institutional underwriter will include material fee waivers in the concession load.

6. Lease Buyout Contribution

In multifamily, some landlords offer to pay the early termination fee on the prospective tenant's existing lease at another property. This is a competitive tactic used to poach tenants from competing properties. The landlord pays a lump sum (typically $500 to $2,000) to cover the tenant's lease-break penalty at their current residence.

Modeling convention: treat as a cash concession and straight-line over the new lease term. The economic effect is identical to a move-in bonus: the landlord pays cash to acquire the tenant, and the cost reduces the effective rent.

Effective Rent Calculation

Net effective rent (NER) is the landlord's actual economic return per unit (or per square foot) per period after all concession costs are amortized across the lease term. The formula varies slightly by property type and concession structure, but the principle is universal: deduct the period cost of every concession from the face rent to arrive at the rent the landlord actually earns.

Multifamily Effective Rent

The multifamily NER formula for a single unit is:

When multiple concession types are combined, the calculation stacks. Consider a unit with $2,200/month face rent, one month free, and a $600 move-in bonus on a 12-month lease. Total lease payments = $26,400. Total concessions = $2,200 (free rent) + $600 (bonus) = $2,800. NER = ($26,400 - $2,800) / 12 = $1,967/month. The effective discount is 10.6%.

At the property level, the aggregate concession load is the sum of all unit-level concession costs across the rent roll. If a 150-unit property has 40 units with one month free and 15 units with a $500 move-in bonus, the total annual concession cost is (40 x average monthly rent of $2,200) + (15 x $500) = $88,000 + $7,500 = $95,500. On a gross potential rent (GPR) of $3,960,000 (150 units x $2,200 x 12), the concession load is 2.4% of GPR. This percentage is the figure that appears on the acquisition underwriting summary and that the Northmarq multifamily concessions analysis identifies as the key metric for comparing concession intensity across properties and markets.

Commercial Effective Rent

The commercial NER formula is more complex because commercial concession packages typically include TI, which requires amortization at the landlord's cost of capital rather than simple straight-lining. The formula deducts each concession on its appropriate basis:

Consider a 10,000 RSF Class A office lease at $58/SF face rent with $70/SF TI, 4 months free, $140,000 in leasing commissions, and a 10-year term. At 7% cost of capital:

• TI amortization: $700,000 amortized at 7% over 10 years = $99,720/year = $9.97/SF/year
• Free rent (straight-lined): 4 months x ($58/12) = $19.33/SF total, / 10 years = $1.93/SF/year
• LC (straight-lined): $140,000 / 10 years / 10,000 SF = $1.40/SF/year
• NER: $58.00 - $9.97 - $1.93 - $1.40 = $44.70/SF/year

The landlord retains 77.1% of face rent. The concession package erodes $13.30/SF/year from the headline number. This is the rent that drives asset valuation, debt underwriting, and investor returns, not the $58/SF that appears in the marketing brochure.

Burn-Off Analysis by Lease Cohort

Concession burn-off is the process by which leases signed with concessions expire and are replaced by leases at market rents without concessions (or with smaller concessions). The burn-off timeline is the period required for the property's rent roll to transition from concession-loaded to stabilized. Understanding burn-off is critical for acquisition underwriting because it determines when the property's cash flow will reach the stabilized level assumed in the underwriting pro forma.

The burn-off timeline is not a single number. It is a schedule driven by the lease expiration profile of the concession-loaded units. Each lease cohort (group of leases signed in the same period with similar concession structures) has its own expiration date, and concessions burn off as each cohort's leases expire and renew.

Worked Example: 150-Unit Multifamily Property

Consider a 150-unit multifamily property acquired in January 2026. The property was built in 2024 and went through an 18-month lease-up that required concessions to fill units. The current rent roll shows three distinct lease cohorts based on when units were leased and what concessions were offered:

At acquisition, Cohort A leases (45 units) have already expired or are expiring. Some tenants renewed at market rent without concessions. Others vacated and were replaced by new tenants at current market rents. The concessions from Cohort A have mostly burned off by the acquisition date.

Cohort B leases (60 units) expire between January and June 2026, the six months following acquisition. These are the critical units for burn-off modeling. As each Cohort B lease expires, the unit renews at the current market rent (assume $2,300/month) without concessions, or the tenant vacates and a new tenant leases at market rent. The concession burn-off for Cohort B occurs gradually over the first six months of the hold period.

Cohort C leases (45 units) were signed at stabilized market rents without concessions. These units contribute no concession load and no burn-off. They are already at the stabilized rent level.

Month-by-Month Burn-Off Schedule

The following schedule models the concession burn-off for Cohort B, assuming 10 leases expire each month from January through June 2026, with a 75% renewal rate (at market rent, no concessions) and 25% turnover (2-week vacancy, then re-leased at market rent, no concessions). The face rent increases from $2,200 to $2,300 upon renewal or re-lease.

By June 2026, all Cohort B concessions have burned off. The property's average effective rent reaches $2,283/month, close to the $2,300 market rent (the small discount reflects turnover vacancy drag during the burn-off period). The burn-off took six months, not the vague "12 months" that some brokers claim in offering memorandums.

The precision of this analysis depends on having a complete rent roll with lease start dates, lease end dates, and concession terms for every unit. Without unit-level lease data, the underwriter is guessing. This is why institutional buyers require full rent rolls with concession detail as part of due diligence, and why Tactica RES's underwriting framework for concession analysis emphasizes the lease-by-lease approach over aggregate estimates.

Key Assumptions in Burn-Off Modeling

Every burn-off model rests on assumptions that the underwriter must stress-test. The three critical assumptions are:

1. Renewal rent assumption. Will renewing tenants accept market rent with no concessions? If market conditions have softened since the original lease was signed, the landlord may need to offer concessions to retain existing tenants, extending the burn-off period. A renewal concession of even half a month free pushes the full burn-off date out by another lease cycle.

2. New lease concession assumption. Will new tenants leasing vacant units require concessions? If the property is still competing for tenants with other new construction, it may need to continue offering concessions to fill turnover vacancies. The burn-off does not complete until the property can lease and renew without concessions.

3. Turnover rate and vacancy duration. Higher turnover during the burn-off period means more vacant months, which reduces the property's effective income even as concessions roll off. A 25% turnover rate with a 30-day average vacancy duration produces a different burn-off profile than a 15% turnover rate with a 14-day vacancy duration. The underwriter must model both the concession burn-off and the turnover vacancy drag simultaneously.

Cyclical vs Structural Concessions

The most important judgment call in concession modeling is whether the concessions are cyclical or structural. The answer determines whether the burn-off assumption in the pro forma is realistic or aspirational.

Cyclical Concessions

Cyclical concessions arise from temporary market conditions that will resolve as the supply-demand balance shifts. The classic example is a new-construction lease-up: the property needs to fill 150 units quickly, and concessions (one to two months free) are used to accelerate absorption. Once the property reaches stabilized occupancy, the concessions are withdrawn. Another example is a seasonal demand trough. In many U.S. markets, leasing velocity slows in the winter months, and landlords offer concessions to avoid extended vacancy. When spring demand returns, the concessions disappear.

Cyclical concessions are characterized by several observable patterns. They are widespread across a submarket, not isolated to a single property. They correlate with measurable market conditions (rising vacancy, elevated completions, seasonal demand patterns). They have historical precedent: the same market experienced concessions during a prior soft period and subsequently recovered. And the underlying property fundamentals (location, quality, amenity set) are competitive with the submarket.

In 2026, supply-constrained markets like the urban Northeast and the Bay Area exhibit cyclical concession patterns. Limited new construction has kept vacancy tight, and the concessions observed in these markets tend to be seasonal or property-specific rather than sustained. As the Freddie Mac Multifamily research notes, markets with delivery-to-stock ratios below 2% historically resolve concession pressure within 12 to 18 months of the supply peak.

Structural Concessions

Structural concessions persist because the underlying cause is not temporary. The three primary drivers of structural concessions are:

Persistent oversupply. Some markets have been in a continuous development cycle for years, with new supply outpacing absorption on a sustained basis. In these markets, concessions are not a phase. They are the equilibrium. The landlord must offer concessions indefinitely because there is always newer, shinier product delivering down the street. Sun Belt markets such as Austin, Nashville, and Phoenix have experienced this dynamic in 2025 and 2026. Record multifamily deliveries in 2024 and 2025 produced vacancy rates of 8% to 12% in some submarkets, and concessions of one to three months free became the norm. The pipeline of projects under construction in 2026 suggests that new supply will continue to pressure these markets through 2027, making the concession environment structural rather than cyclical.

Competitive obsolescence. An older property competing against newer construction may need to offer permanent concessions to compensate for a quality gap. A 1990s-vintage garden apartment complex competing with a 2024-vintage mid-rise with modern finishes, a pool, a fitness center, and a coworking lounge may need to offer one month free on every lease simply to maintain occupancy. The concession compensates for a product deficit that cannot be resolved without a capital renovation. Until the renovation occurs, the concessions are structural.

Location disadvantage. A property in a secondary location (away from employment centers, transit, retail) may require permanent concessions to attract tenants who could lease in a better location at a similar price point. The concession compensates for a location gap that is immovable. No amount of capital improvement changes the property's distance from the highway, the train station, or the downtown core.

Implications for Underwriting

When concessions are cyclical, the burn-off assumption is valid. The underwriter models the concession load burning off over the lease expiration schedule and arrives at a stabilized NOI that excludes concession costs. The stabilized value is the price the buyer is willing to pay, and the concession drag during the burn-off period is a temporary cost reflected in the return analysis.

When concessions are structural, the burn-off assumption is invalid. The underwriter must include concession costs in the stabilized NOI because the property will continue to offer concessions indefinitely. A stabilized NOI that excludes structural concession costs overstates the property's income-generating capacity and produces a value that no informed buyer will pay. This is the single most common valuation error in multifamily acquisitions: treating structural concessions as if they will burn off.

The practical difference is significant. On the 150-unit property in our worked example, if the $95,500 annual concession load is cyclical and burns off, the stabilized NOI is higher by $95,500 per year. At a 5.25% cap rate, that $95,500 translates to $1,819,048 in property value. If the underwriter mistakenly treats structural concessions as cyclical, the property is overvalued by nearly $1.82 million. This is why institutional buyers conduct submarket-level supply analysis and competitive property audits before accepting a broker's burn-off assumption.

Impact on Exit Valuation

The gap between face rent NOI and effective rent NOI, when capitalized at the exit cap rate, produces a valuation difference that can determine whether an acquisition meets its return hurdle or falls short. This section walks through a worked example using the 150-unit multifamily property from the burn-off analysis above.

Worked Example: Face Rent NOI vs Effective Rent NOI at Exit

Assume the following stabilized-year income and expense assumptions for the 150-unit property:

The NOI gap is $90,725 per year. Now apply an exit cap rate of 5.25% to each NOI figure:

• Face rent NOI valuation: $2,223,000 / 0.0525 = $42,342,857
• Effective rent NOI valuation: $2,132,275 / 0.0525 = $40,614,762
• Valuation difference: $1,728,095

The $1.73 million gap is the capitalized value of the concession load. A buyer who underwrites to face rent NOI overpays by $1.73 million. On a $40.6 million acquisition, that is a 4.3% premium that goes directly against equity returns.

The impact on investor returns is even more pronounced. If the deal is financed at 65% LTV, the equity investment is approximately $14.2 million. The $1.73 million overpayment represents 12.2% of the equity check. On a 5-year hold with a target equity multiple of 2.0x, the overpayment reduces the achievable multiple by approximately 0.12x to 0.15x, depending on the hold period cash flow profile. This is the difference between hitting a return target and missing it.

The Seller's Perspective

Sellers and their brokers have an incentive to present face rent NOI in the offering memorandum because it produces a higher indicated value. The offering memo will often show "pro forma NOI" or "stabilized NOI" that assumes concessions have been eliminated. This is not necessarily deceptive. If the concessions are genuinely cyclical and the property is on a credible path to stabilization, the pro forma NOI is a reasonable forecast of future income. But the buyer must independently verify the burn-off assumption by modeling the lease-by-lease expiration schedule, assessing the submarket supply pipeline, and stress-testing the timeline.

Institutional buyers and CMBS lenders do not accept face rent NOI at face value. The lender's underwriter will independently compute the concession-adjusted NOI using the rent roll, will verify the concession terms on each lease, and will apply the effective rent in the debt service coverage and loan-to-value calculations. If the lender's underwriting produces a lower NOI than the buyer's, the loan proceeds will be lower, and the buyer will need to cover the gap with additional equity. This is a common source of friction in multifamily transactions where the seller's NOI and the lender's NOI diverge because of different concession assumptions.

ASC 842 Treatment of Lease Incentives

Concessions that qualify as lease incentives under ASC 842 (the FASB lease accounting standard) receive specific accounting treatment on both the lessor's and lessee's books. The key principle is that lease incentives are not income to the tenant or an expense to the landlord in the period they are granted. Instead, they are spread across the lease term through the measurement of the lease liability and right-of-use asset (lessee side) or through straight-line rental income recognition (lessor side).

Lessee Accounting

Under FASB ASC 842, a lease incentive received by the lessee reduces the right-of-use (ROU) asset at lease commencement. The treatment depends on the form of the incentive:

• Free rent periods: Lease payments are defined as the payments the lessee is required to make. If the lease specifies zero rent for months 1 through 3, those months produce no lease payment and naturally reduce the lease liability and ROU asset measurements. No separate incentive adjustment is needed because the free rent is already embedded in the payment schedule.
• Cash concessions (move-in bonus, lease buyout contribution): A cash payment from the landlord to the tenant is a lease incentive that reduces the ROU asset at commencement. The lessee records the ROU asset net of the incentive received.
• TI allowance: If the improvements are lessee assets, the TI allowance is a lease incentive that reduces the ROU asset. If the improvements are lessor assets, the TI is the funding mechanism for the landlord's own property and no incentive adjustment is needed on the lessee's books.

The effect of the incentive reduction is that the lessee's straight-line lease expense is lower over the lease term. The total lease cost (rent payments minus incentives received) is spread evenly across the term, producing a level expense in each period. This straight-line treatment means the lessee's income statement shows a consistent occupancy cost regardless of whether the free rent occurs at the beginning, middle, or end of the lease term.

Lessor Accounting

For the landlord, lease incentives reduce the total consideration received under the lease. Under ASC 842, the lessor recognizes rental income on a straight-line basis over the lease term. The total consideration is computed as aggregate contractual rent minus lease incentives (free rent value, cash concessions, TI if lessee-owned). This total is divided by the number of periods to produce the straight-line rental income per period.

If a 12-month multifamily lease specifies $2,200/month with one month free, the total consideration is $2,200 x 11 = $24,200. The straight-line monthly income is $24,200 / 12 = $2,017. In the free rent month, the lessor records $2,017 of rental income (no cash received) and books the difference as a deferred rent receivable. In subsequent months, the lessor records $2,017 of income against $2,200 of cash received, with the $183 difference reducing the deferred rent receivable. By lease end, the deferred rent receivable is zero and the total income recognized equals $24,200.

This straight-line treatment is mandatory under GAAP. It means that a property's GAAP income during a concession-heavy period is higher than cash income (because GAAP straight-lines the free rent cost) and lower than cash income during the post-concession period (because GAAP reduces income to the straight-line level even when the tenant is paying full rent). The gap between GAAP income and cash income is the deferred rent asset (or liability) on the balance sheet.

Common Mistakes

Concession modeling errors fall into two categories: mechanical errors in the calculation and judgment errors in the assumptions. Both produce incorrect valuations and misguided investment decisions. The following are the most common mistakes observed in institutional underwriting practice.

1. Ignoring the concession load entirely. The most basic error: using face rent in the pro forma without adjusting for concessions. This overstates gross potential rent, inflates NOI, and produces a valuation that exceeds what the property will actually generate. Brokers sometimes present pro forma income on a face rent basis "because the concessions will burn off." The buyer who accepts this presentation without independently modeling the concession load and burn-off timeline is buying a number, not an analysis.

2. Applying a blanket burn-off assumption. "Concessions burn off in 12 months" is a common line in offering memorandums. It may be true, or it may not. The actual burn-off timeline depends on the lease expiration schedule, not on a round number. If 80% of the concession-loaded leases expire in months 1 through 6 and the remaining 20% expire in months 10 through 12, the burn-off is front-loaded, and a 12-month assumption is too conservative. If the leases are evenly distributed across a 15-month window, the 12-month assumption is too aggressive. Model the actual lease schedule.

3. Confusing cyclical and structural concessions. This is the judgment error that produces the largest valuation mistakes. An underwriter who models structural concessions as cyclical will assume the concession load burns off and will produce a stabilized NOI that the property will never achieve. The result is an overpayment at acquisition that no amount of asset management can overcome. Before modeling burn-off, conduct the submarket supply analysis and competitive property audit described in the cyclical vs structural section above.

4. Straight-lining TI instead of amortizing at cost of capital. In commercial leases, TI is a capital investment, not a revenue reduction. Straight-lining TI (dividing the TI amount by the lease term) understates the landlord's concession cost because it ignores the time value of the capital deployed. The correct method amortizes TI at the landlord's cost of capital, which produces a higher annual deduction and a lower effective rent. On a $75/SF TI over 10 years, the difference between straight-line ($7.50/SF/year) and 7% amortization ($10.68/SF/year) is $3.18/SF/year, or $31,800/year on a 10,000 SF lease. Over the 10-year term, the cumulative error is $318,000.

5. Failing to stress-test the renewal concession assumption. Most burn-off models assume that expiring leases renew at market rent with no concessions. This assumption may be optimistic in a market where competitors are still offering concessions. If the renewal requires even half a month free to retain the tenant, the concession load persists. The underwriter should model at least two scenarios: (a) renewals with no concessions (the base case) and (b) renewals with reduced concessions (the downside case). The difference in NOI between the two scenarios quantifies the concession assumption risk.

6. Ignoring the concession load at exit. Acquisition underwriters focus on the buy-side concession analysis but sometimes forget that the same analysis applies at disposition. If the exit buyer faces a concession-loaded rent roll, the exit buyer will underwrite to effective rent NOI, not face rent NOI. The exit cap rate applied to a lower NOI produces a lower exit price. The hold-period return model should reflect the exit concession environment, not just the acquisition concession environment.

7. Using property-level averages instead of unit-level data. A 150-unit property with a "5% concession load" may have 30 units with 16.7% concession loads (two months free on 12-month leases) and 120 units with no concessions. The property-level average masks the concentration risk. If the 30 concession-loaded units are clustered in a single building or a single floor plan, the burn-off depends on the renewal behavior of those specific units. Property-level averages are useful for screening. Unit-level data is required for underwriting.

Model It in Apers

Related Articles

• Free Rent and Abatement: Effective Rent Accounting. The free rent component of the concession package. How to straight-line free rent, model abatement periods in the pro forma, and handle GAAP recognition under ASC 842.
• Tenant Improvement Allowances: Market Standards. The TI component of commercial concession packages. PSF ranges by property type, disbursement methods, amortization math, and the effective rent impact of TI at different cost of capital rates.
• Leasing Commission Structures and Broker Compensation. The LC component of effective rent. How commission structures differ by property type and how LC flows through the landlord's pro forma as a below-the-line concession cost.
• Renewal Probability and Rollover by Tenant Type. The renewal assumptions that drive burn-off modeling. How renewal probabilities affect the expected concession exposure at lease rollover and how institutional investors model the distribution of renewal outcomes.
• Below the Line: TI, LC, CapEx, and Reserves. Where concession costs sit in the property-level cash flow model. How below-the-line items reduce NOI to arrive at cash flow before debt service.