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effective rental rate

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effective rental rate

True rent, after taking into account rent concessions; usually expressed as a dollar amount per square foot.Some parts of the country quote rents as dollars per foot per month; others use dollars per foot per year.

Example: If 5,000 square feet of office space normally rents for $20 per foot per year, but the landlord gives 6 months' free rent on a 5-year lease, then the effective rental rate is calculated as follows:

5,000 feet $20 per foot $100,000 per year

6 months free rent $0

4.5 years paid rent @ $100,000 per year $450,000

$450,000 paid rent spread over a 5-year term $90,000 per year effective rent

$90,000 effective rent 5,000 feet $18 per foot effective rental rate



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Asking and effective rental rates may decline another 10% before they reach bottom sometime in 2011.
2) Effective rental rates (the profit a landlord makes after netting out all costs of his concession package) are increasing.
When the ongoing Effective Rental Rate climbs above the cost of buying new, you should start thinking about replacing the equipment.
 
 
 
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