A leasing decision gets justified to someone: a client, a committee, a CFO. The number that survives that conversation is almost never the number on the first page of the proposal.
Two rates, two jobs
Average gross effective rental rate is base rent plus reimbursements, less free rent, per year of term. It answers: what does occupancy actually collect, before capital.
Annual net effective rate is the landlord’s true undiscounted profit after concessions, commissions, and expenses. It answers: what does the owner keep. A tenant reading the same number is looking at the inverse — what the occupancy really costs once the giveaways are in.
Concessions are not commissions
Tenant improvements, FF&E, moving allowances, an existing-lease takeover, and free rent are concessions to the tenant. A commission is not. Mixing them in one “deal cost” cell is how a spreadsheet starts lying. Leasing Locker tracks them separately, then reports landlord capital outlay as the sum that includes commissions.
The five-building proof
Giga Healthcare Solutions took five Atlanta proposals. Headline rents: $26.50, $26.75, $27.50, $29.00, $31.50. Ranked on face, Phipps Overlook wins and Buckhead Corporate Park looks unserious.
Ranked on annual net effective — what the landlord keeps — Lindbergh Tower ($29.00 face, $7.85 NER) is the best deal for the tenant. Phipps Overlook ($26.50 face, $11.01 NER) is the worst. The cheapest headline delivered the thinnest concession package on the board: $45.54/SF against Buckhead’s $83.44.
The $26.50 proposal did not merely fail to help. It pointed the wrong way, in both directions, on the same screen.
Why a high face rate with a fat package
Owners hold a high face rate while giving away concessions to preserve the headline for a reversion. A buyer in three years caps a rent roll that does not reflect what it cost to fill the building. Buckhead Corporate Park is that strategy in miniature: highest face on the board, deepest package, longest payback (month 57 of 94).
If you only ever rank on headline, you will talk your client out of the building they should take, and into the one that looks cheap.