Finance & Real Estate Open Ended Question: Explain the difference between Asking Rent and Effective Rent.

Finance & Real Estate Open Ended Question:

Explain the difference between Asking Rent and Effective Rent.

Expert Solution

Answer:

ASKING RENT- Asking rent is the quoted base rental rate before considering any lease increments or incentives. It is also known as face rate or face rent. It indicates the rent that will be paid per square foot of the leased space. It does not incorporate additional costs or building expenses that are included while calculating effective rent.

EFFECTIVE RENT- It is the rental rate that is being arrived over the entire term of the lease which includes incentives, concessions or increments. In other words, it is the average amount of money that will be paid by you over the period of your lease term. It considers additional costs or building expenses. This is the rent which is used for comparing other building rentals option as it is the actual rent that is paid. So, if you are considering a building lease, it is important that your advisor conducts a analysis to compare the effective rent of each option and then take the decision.

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