When it comes to renting office space, the terms "nominal rent" and "effective rent" often come up. But what exactly do they mean and what is the difference between them? In this article, we explain what these two terms mean and why it is so important to know the differences.
What is the nominal rent?
The nominal rent is the contractually agreed rental price per square meter of office space. This is the official rent specified in the rental agreement. This amount reflects the "gross rent" without any deductions or allowances. The nominal rent therefore serves as the starting point for the rental price and is often the value that landlords specify in their offers. However, it does not necessarily reflect the actual costs for the tenant.
What is the effective rent?
The effective rent, on the other hand, represents the actual rent that the tenant must pay each month. It takes into account all concessions or benefits that the landlord grants to the tenant in order to make the rental offer more attractive. Such concessions include, among other things:
- Rent-free periods: The tenant does not pay rent for a certain period of time, for example in the first few months after signing the contract. This is the most common form of so-called "incentives."
- Subsidies for expansion or renovation costs: The landlord covers all or part of the costs for renovation work or furnishing the office space.
- Relocation allowance: The landlord covers all or part of the costs of moving into the new office space.
- Reduction in value adjustment: The landlord grants a lower scale or can suspend the index for a certain period of time.
These incentives are often used to attract tenants or secure long-term tenancies. The concessions granted depend on various factors, such as the tenant's creditworthiness, the term of the lease, and the necessary investments in the property.
In summary, it can be said that distinguishing between nominal and effective rent is essential for understanding the actual rental costs. While the nominal rent represents the officially agreed price per square meter in the rental agreement, the effective rent shows the actual monthly costs, taking into account benefits such as rent-free periods or subsidies. A precise comparison of the effective rents of different offers can therefore lead to considerable savings. Larbig & Mortag calculates this effective rent as standard for its customers, who thus have an accurate overview of the costs over the term of the lease. Larbig & Mortag has developed a comprehensive calculation and benchmarking tool for this purpose.
