There is a reason concessions exist instead of just lower rents, and the reason is that everyone is watching the face number. The landlord's other leases, the appraiser's comps, the lender's model, the eventual buyer's broker package: all of them read face rent. So a soft market clears not by cutting the number everyone watches but by giving months away for free around it, and the lease announces a rent that no twelve months of its actual cash flow will ever produce.
Effective rent is the correction: the lease's real economics averaged over its term, concessions included. The spread between face and effective is not a technicality. It is a measurement of how much the quoted market is overstating the actual market, and it moves exactly when you most need to know it, widening in soft conditions while face rents stand conspicuously still. An operator who tracks asking rents is reading the market's press release. The one who tracks effective rents is reading its bank statement.
The fooling happens at specific moments, worth naming so you recognize them. In acquisitions, a rent roll of recent leases at strong face rents with heavy free rent buried in the files is a building whose income is about to be relitigated at every renewal, and a buyer capitalizing the face rents just paid for cash flow that was never there. In appraisals and comps, face-rent surveys propagate the fiction outward, which is how whole submarkets carry quoted rents nobody actually pays. And in your own leasing, matching a competitor's face rent while they quietly give away four months is losing the deal while believing you matched it.
Office is where the spread runs widest, because office concessions stack: free rent on top of tenant improvement packages on top of long build-out periods, until the first-year cash on a trophy face rent is startlingly small. But retail is not exempt, and any lease negotiated in a tenant's market deserves the effective-rent read before its face number goes anywhere near a model.
The widget below prices one lease: face rent, term, free months, and optionally the TI package amortized across the term, returning the effective rent and the discount to face. Run a lease you know and the spread will likely be wider than instinct suggested. Then the building-level point, which is where the napkin ends: a rent roll is many leases signed in different markets with different concessions, and its true income quality is the assembly of all those effective rents, not an average of the face numbers. PropCalc™ models each lease's actual economics through the full hold, so the pro forma runs on what the leases pay rather than what they announce. The face number is for the sign out front. Underwrite the bank statement.