The actual rental rate a landlord would be able to obtain after deducting the value of concessions from the base rental rate that are extended to a tenant (e.g., leasing commissions, a renovation/ improvement allowance, free rent, moving allowance, etc.). The effective rental rate and is typically expressed as an average lease rate over the term of the lease contract.

For example, if a tenant entered into a 4 year lease for $25/sf per year, and during the lease term received a $10/sf tenant improvement allowance and four months rent waiver, the net effective rent would be calculated as follows:

$25 / 12 months = $2.08/month x 4 months free = $8.32 plus $10/sf tenant improvement allowance = $18.32/sf total cost to landlord. Now, if  this cost is divided by the number of years: $18.32 / 4 year lease = $4.58 per year. This would be deducted from the stated rate of $25/sf = $20.42/sf net effective rent).

Net effective rent is the average rent that tenants pay during their lease term (it is equal to the gross rent minus concessions). However, broker fees are typically based on gross rent instead of net effective rent.

Net effective rent (for short, NER) is also known as effective rent.