How this calculator works
Allocate all incentives across the entire lease term. Free months waive face rent only; operating costs continue every month in this model. A one-time tenant allowance reduces the total. This is an undiscounted average for budgeting, so it does not price the timing of cash flows or lease accounting liabilities.
Formula
Total net cost = monthly face rent × (lease months - free months) - cash allowance + monthly operating costs × lease months. Net effective monthly rent = total net cost / lease months. Annual area rate = monthly net rent × 12 / area in square metres.
Worked example
A twelve-month lease at $2,400, with one free month, a $1,200 allowance and $100 monthly operating costs, costs $26,400 overall. Its monthly net effective rent is $2,200.
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Frequently asked questions
Is net effective rent the monthly bill?
Usually not. You pay the face rent when it is due; net effective rent spreads incentives over the whole term.
Do free months also remove operating charges?
This model keeps operating charges payable. If the agreement waives them, deduct that concession through the allowance field.
Can free months be fractional?
Yes, to represent partial-month concessions. The lease term itself must be a whole number of months.