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Effective Rent

Effective Rent
Effective Rent Concessions associated with long-term leases must account for the passage of time by discounting concessions when they occur. Merely averaging the cash flows will not result in effective rent. To determine effective rent, the sums of all cash flows associated with the lease are discounted to present value. This present value is then amortized into equal payments over the lease term and further converted into a rental rate per square foot.