The rent in a proposal is the first year’s number. Escalations, CAM, free months and the build-out allowance decide what the space costs over five or ten years. This calculator adds them up from your inputs, one lease year at a time.
How escalations add up
A 3% escalation looks small in year one. Compounded, $18.00 per square foot becomes $20.26 by year five.
On 3,000 square feet, five years of rent totals about $286,700 instead of $270,000 at a flat rate. CAM can climb every year as well, so check whether the lease caps it before you sign.
Lease cost questions, answered
What is effective rent?
Effective rent is the average base rent per square foot per year after free rent and the tenant improvement allowance are spread across the term. A $15 per square foot allowance on a five-year lease is worth $3.00 per square foot per year. Compare competing offers on effective rent, not on face rent.
Does free rent cover CAM too?
Not always, and this calculator assumes it does not: free months here waive base rent only, as many leases are written. Some leases waive CAM, taxes and insurance as well, and some abate only part of the rent. Read the abatement clause, or have the lease abstracted, before you count the savings.
Is the allowance free money?
Only if the build-out would otherwise be yours to pay. An allowance the landlord recovers through a higher rent is a loan repaid inside the rent, so weigh the allowance per square foot against the rent difference between offers. Unspent allowance may be lost unless the lease lets you apply it to rent.
How accurate is the CAM figure?
Only as accurate as the estimate you enter. CAM is billed on estimates during the year and reconciled against actual costs afterward, so the real figure can land higher or lower. Ask for the last two reconciliations, and check whether the lease caps yearly increases. A CAM reconciliation review checks one property year.
Should I compare renewing against moving?
Yes, on the same basis: effective rent plus the moving, build-out and downtime costs of the new space. Run each option through the calculator with its own free rent and allowance, then add the one-time costs. A renewal and negotiation brief does this against market rent, from $2,000 per lease.
Know the cost before you sign
A renewal and negotiation brief prices your options against market rent in 7 business days.