How Do I Compare Two Lease Offers on a True All-In Basis?

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📅 Published Jun 21, 2026

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How Do I Compare Two Lease Offers on a True All-In Basis?

Direct Answer

You compare two lease offers by ignoring the headline rent entirely and computing the net effective rent (NER) — total cost over the full term minus every concession, divided by your usable square feet and the number of years — because the lower face rent frequently loses once you add NNN charges, the load factor, free rent, TI, and escalations.

Two offers quoted at $30 and $28 per square foot can flip the moment you learn the $28 deal is full-service gross with a 20% load factor and the $30 deal is triple-net with a 12% load factor and four months of free rent. The all-in stack you must build for each offer: (1) base rent across the term with escalations (a 3% annual bump turns $30 into ~$34 by year five); (2) the NNN/operating-expense load — taxes, insurance, CAM — at $8 to $15 per square foot per year if it is triple-net; (3) the load factor, since you pay rent on rentable square feet but only use usable — a 12% vs 20% load can swing real cost by $3 to $6 per usable square foot; and (4) subtract concessions — free rent and any TI you will actually use.

The single biggest screw-up: comparing a gross lease to a net lease on the face rate; they are different units and the comparison is meaningless until you convert both to all-in dollars per usable square foot per year. Build the stack for each, divide by usable square footage and term, and the lower NER wins — full stop.

Why The Headline Rent Lies

The face rent (the per-square-foot number on the term sheet) is the most-quoted and least-meaningful figure in commercial leasing. It omits almost everything that determines what you actually pay. Two structural differences alone can reverse which deal is cheaper:

Gross vs. Net leases are different units. In a full-service gross (FSG) or modified gross lease, operating expenses are baked into the rent. In a triple-net (NNN) lease, you pay base rent plus your pro-rata share of taxes, insurance, and CAM on top — typically $8 to $15 per square foot per year more. A $28 NNN rate can be $38+ all-in, while a $30 gross rate stays near $30. Comparing the face rates is comparing pounds to kilograms.
Rentable vs. Usable square feet (the load factor). You pay rent on rentable square feet, which includes your share of common areas (lobbies, corridors, restrooms). You can only put desks or racks in usable square feet. The load factor (also called the add-on or core factor) is the markup — commonly 10% to 20%. A 1,000-usable-square-foot suite at a 20% load bills you for 1,200 rentable feet; at 12% load, only 1,120. Same usable space, very different rent.

Until you normalize both offers to all-in dollars per usable square foot per year, you are guessing.

Build The All-In Stack — Component By Component

For each offer, assemble the same stack so you are comparing identical units:

Base rent over the full term, with escalations. Do not use year-one rent. Apply the annual escalation (often 2.5% to 3.5%, or a fixed step) across every year and total it. A $30 start at 3% annual runs roughly $30.00, $30.90, $31.83, $32.78, $33.77 over five years — average about $31.86, not $30.
Operating-expense load (if NNN or modified gross). Add the estimated taxes + insurance + CAM per square foot. For NNN, get the landlord's current operating-expense estimate in writing and assume it escalates too. This is the number landlords keep off the term sheet — demand it.
Convert to usable using the load factor. Multiply rentable cost by the load factor to express everything per usable square foot, so a low-load and high-load building compare honestly.
Subtract free rent. Total the months of abatement and spread their value across the term.
Subtract usable TI. Only count TI you will actually spend (see the use-it-or-lose-it trap), valued as a credit against total cost.
Add parking, after-hours HVAC, and other recurring fees. Reserved parking can run $50 to $400 per stall per month; after-hours HVAC and separately metered utilities add up. Include any that differ between the two offers.
Add one-time costs. Moving, cabling, signage, and security deposits differ between buildings — fold the differences in.

flowchart TD A[Two offers: $30 and $28 face rent] --> B[STOP - face rent is meaningless] B --> C[For EACH offer build the all-in stack] C --> D[Base rent x escalations over full term] D --> E{Gross or NNN?} E -->|NNN| F[Add taxes + insurance + CAM $8-15/sf] E -->|Gross| G[Op-ex already included] F --> H[Apply load factor to get per-USABLE-sf] G --> H H --> I[Subtract free rent + usable TI] I --> J[Add parking, after-hours HVAC, one-time costs] J --> K[Divide by usable sf and term = NER] K --> L[Lower NER wins]

A Worked Comparison — Watch The Flip

Take two real-feeling offers for the same 10,000 usable square feet, five-year term.

Offer A — looks cheaper: $28 per square foot, full-service gross, 20% load factor, 3% escalation, 2 months free rent, no TI.

Rentable square feet: 10,000 × 1.20 = 12,000.
Year-one rent: 12,000 × $28 = $336,000. Over five years with 3% escalation: about $1,783,000.
Op-ex: included (gross).
Free rent: 2 months ≈ $56,000 credit.
All-in five-year cost: about $1,727,000.
Per usable square foot per year: $1,727,000 ÷ 10,000 ÷ 5 = ~$34.5.

Offer B — looks pricier: $30 per square foot, triple-net, 12% load factor, 3% escalation, $8/sf op-ex, 4 months free rent, $30/sf usable TI you will fully use.

Rentable square feet: 10,000 × 1.12 = 11,200.
Year-one base rent: 11,200 × $30 = $336,000. Five years with escalation: about $1,783,000.
Op-ex: 11,200 × $8 = $89,600/yr, ~$475,000 over five years (with escalation).
Free rent: 4 months ≈ $112,000 credit.
TI: 10,000 × $30 = $300,000 credit (fully used).
All-in five-year cost: ~$1,783,000 + $475,000 − $112,000 − $300,000 = ~$1,846,000.
Per usable square foot per year: ~$36.9.

In this case Offer A wins on NER (~$34.5 vs ~$36.9) — but only because we added the NNN op-ex to B and corrected for the load factor on A. Change the inputs (a bigger TI, a lower op-ex estimate, a worse load on A) and it flips. The point is not which number won; it is that you cannot know until you build both stacks to the same per-usable-square-foot unit.

graph LR A[Offer A: $28 gross] --> C[All-in NER ~$34.5/usable sf/yr] B[Offer B: $30 NNN] --> D[All-in NER ~$36.9/usable sf/yr] C --> E[Lower NER wins - here, Offer A] D --> E E --> F[Decision driven by load + op-ex, NOT face rent]

What Else To Weigh Beyond The Number

NER decides most of it, but a few non-dollar factors can justify paying a higher NER:

Operating-expense risk. A gross lease caps your exposure; a NNN lease passes through increases. If the NNN deal lacks a CAM cap and a strong audit right, its real cost is uncertain and riskier than the model shows. (A capped, auditable NNN is much safer.)
Build-out time and downtime. A move-in-ready space saves months of rent-paying-while-dark. Factor any double-rent or downtime into the comparison.
Lease flexibility. Renewal options, expansion rights, termination/kick-out clauses, and sublease/assignment rights have real value and differ between offers.
Location and logistics. Dock access, parking ratio, and commute affect operations and staff — secondary to NER, but tiebreakers.

Always model the CAM cap and audit right alongside NER for any NNN offer; an uncapped NNN deal can drift well above its modeled NER.

FAQ

What number actually decides between two lease offers? Net effective rent (NER) — total cost over the full term minus every concession, divided by usable square feet and the number of years. Face rent is meaningless because it omits NNN charges, the load factor, escalations, free rent, and TI.

Build the all-in stack for each offer, convert both to dollars per usable square foot per year, and the lower NER wins.

How do I compare a gross lease to a triple-net lease? Convert them to the same unit. In a gross lease, operating expenses are included; in a triple-net (NNN) lease, add taxes, insurance, and CAM — typically $8 to $15 per square foot per year — on top of base rent.

A $28 NNN rate can be $38+ all-in, so you must add the op-ex estimate to the NNN offer before comparing it to the gross one.

What is the load factor and why does it matter? The load factor is the markup from usable square feet (space you can occupy) to rentable square feet (what you pay rent on, including shared common areas), commonly 10% to 20%. At a 20% load you pay for 1,200 rentable feet to use 1,000; at 12%, only 1,120.

Two offers with the same face rate but different loads can differ by $3 to $6 per usable square foot in real cost.

Should I ever pick the higher-NER offer? Sometimes. A gross lease caps your operating-expense risk, so a slightly higher gross NER may beat a lower uncapped NNN NER once you account for pass-through risk. Move-in-ready space that avoids months of build-out downtime, plus better renewal, expansion, and termination rights, can also justify a higher NER.

Model the CAM cap and audit right before trusting any NNN number.

Sources

CBRE, "Net Effective Rent: How to Compare Lease Proposals on an Apples-to-Apples Basis."
JLL, "Gross vs. Net Leases and the Load Factor — A Tenant Comparison Guide."
Cushman & Wakefield, "Lease Economics: Concessions, Escalations, and Effective Rent Benchmarks."
BOMA International, "Standard Method for Measuring Floor Area and the Load/Add-On Factor."
NAIOP, "Operating Expense Pass-Throughs and Net Lease Cost Structures."
IREM, "Lease Concession and Effective Rent Calculation Standards."
Tenant-rep broker commentary on normalizing gross and NNN offers to dollars per usable square foot.

Keep reading

<svg xmlns="http://www.w3.org/2000/svg" viewBox="0 0 1200 340" role="img" aria-label="How Do I Compare Two Lease Offers on a True All-In Basis? — PULSE Buildouts"><rect width="1200" height="340" fill="#EBE9DE"/><rect width="14" height="340" fill="#C0531F"/><text x="58" y="116" font-family="Arial,Helvetica,sans-serif" font-size="32" font-weight="800" letter-spacing="3" fill="#C0531F">PULSE BUILDOUTS · COMMERCIAL REAL ESTATE</text><text x="56" y="198" font-family="Arial,Helvetica,sans-serif" font-size="60" font-weight="800" fill="#2b2b2b">Save money. Don’t get screwed.</text><text x="58" y="258" font-family="Arial,Helvetica,sans-serif" font-size="30" font-weight="600" fill="#6b5b4d">Leases, TI, NNN &amp; buildouts — negotiated in your favor</text><g transform="translate(1010,86)" fill="none" stroke="#C0531F" stroke-width="9" stroke-linejoin="round"><rect x="20" y="40" width="150" height="130"/><line x1="20" y1="40" x2="95" y2="6"/><line x1="170" y1="40" x2="95" y2="6"/><rect x="50" y="80" width="36" height="36"/><rect x="104" y="80" width="36" height="36"/><rect x="74" y="128" width="42" height="42"/></g></svg>

# How Do I Compare Two Lease Offers on a True All-In Basis?

## Direct Answer

You compare two lease offers by ignoring the headline rent entirely and computing the **net effective rent (NER)** — total cost over the full term minus every concession, divided by your usable square feet and the number of years — because the lower face rent frequently loses once you add **NNN charges, the load factor, free rent, TI, and escalations**. Two offers quoted at **$30 and $28 per square foot** can flip the moment you learn the $28 deal is **full-service gross with a 20% load factor** and the $30 deal is **triple-net with a 12% load factor and four months of free rent**. The all-in stack you must build for each offer: **(1)** base rent across the term with **escalations** (a 3% annual bump turns $30 into ~$34 by year five); **(2)** the **NNN/operating-expense load** — taxes, insurance, CAM — at **$8 to $15 per square foot per year** if it is triple-net; **(3)** the **load factor**, since you pay rent on **rentable** square feet but only use **usable** — a 12% vs 20% load can swing real cost by **$3 to $6 per usable square foot**; and **(4)** subtract **concessions** — free rent and any TI you will actually use. The single biggest screw-up: comparing a **gross** lease to a **net** lease on the face rate; they are different units and the comparison is meaningless until you convert both to **all-in dollars per usable square foot per year**. Build the stack for each, divide by usable square footage and term, and the lower NER wins — full stop.

## Why The Headline Rent Lies

The **face rent** (the per-square-foot number on the term sheet) is the most-quoted and least-meaningful figure in commercial leasing. It omits almost everything that determines what you actually pay. Two structural differences alone can reverse which deal is cheaper:

- **Gross vs. Net leases are different units.** In a **full-service gross (FSG)** or **modified gross** lease, operating expenses are baked into the rent. In a **triple-net (NNN)** lease, you pay base rent **plus** your pro-rata share of **taxes, insurance, and CAM** on top — typically **$8 to $15 per square foot per year** more. A $28 NNN rate can be **$38+ all-in**, while a $30 gross rate stays near $30. Comparing the face rates is comparing pounds to kilograms.
- **Rentable vs. Usable square feet (the load factor).** You pay rent on **rentable** square feet, which includes your share of common areas (lobbies, corridors, restrooms). You can only put desks or racks in **usable** square feet. The **load factor** (also called the add-on or core factor) is the markup — commonly **10% to 20%**. A 1,000-usable-square-foot suite at a **20% load** bills you for **1,200 rentable feet**; at **12% load**, only **1,120**. Same usable space, very different rent.

Until you normalize both offers to **all-in dollars per usable square foot per year**, you are guessing.

## Build The All-In Stack — Component By Component

For each offer, assemble the same stack so you are comparing identical units:

- **Base rent over the full term, with escalations.** Do not use year-one rent. Apply the **annual escalation** (often **2.5% to 3.5%**, or a fixed step) across every year and total it. A **$30** start at **3% annual** runs roughly **$30.00, $30.90, $31.83, $32.78, $33.77** over five years — average about **$31.86**, not $30.
- **Operating-expense load (if NNN or modified gross).** Add the estimated **taxes + insurance + CAM** per square foot. For NNN, get the landlord's current **operating-expense estimate** in writing and assume it **escalates** too. This is the number landlords keep off the term sheet — demand it.
- **Convert to usable using the load factor.** Multiply rentable cost by the load factor to express everything **per usable square foot**, so a low-load and high-load building compare honestly.
- **Subtract free rent.** Total the months of abatement and spread their value across the term.
- **Subtract usable TI.** Only count TI you will **actually spend** (see the use-it-or-lose-it trap), valued as a credit against total cost.
- **Add parking, after-hours HVAC, and other recurring fees.** Reserved parking can run **$50 to $400 per stall per month**; after-hours HVAC and separately metered utilities add up. Include any that differ between the two offers.
- **Add one-time costs.** Moving, cabling, signage, and security deposits differ between buildings — fold the differences in.

```mermaid
flowchart TD
    A[Two offers: $30 and $28 face rent] --> B[STOP - face rent is meaningless]
    B --> C[For EACH offer build the all-in stack]
    C --> D[Base rent x escalations over full term]
    D --> E{Gross or NNN?}
    E -->|NNN| F[Add taxes + insurance + CAM $8-15/sf]
    E -->|Gross| G[Op-ex already included]
    F --> H[Apply load factor to get per-USABLE-sf]
    G --> H
    H --> I[Subtract free rent + usable TI]
    I --> J[Add parking, after-hours HVAC, one-time costs]
    J --> K[Divide by usable sf and term = NER]
    K --> L[Lower NER wins]
```

## A Worked Comparison — Watch The Flip

Take two real-feeling offers for the same **10,000 usable square feet**, **five-year term**.

**Offer A — looks cheaper:** **$28 per square foot, full-service gross, 20% load factor, 3% escalation, 2 months free rent, no TI.**

- Rentable square feet: **10,000 × 1.20 = 12,000**.
- Year-one rent: **12,000 × $28 = $336,000**. Over five years with 3% escalation: about **$1,783,000**.
- Op-ex: included (gross).
- Free rent: 2 months ≈ **$56,000** credit.
- All-in five-year cost: about **$1,727,000**.
- Per usable square foot per year: **$1,727,000 ÷ 10,000 ÷ 5 = ~$34.5**.

**Offer B — looks pricier:** **$30 per square foot, triple-net, 12% load factor, 3% escalation, $8/sf op-ex, 4 months free rent, $30/sf usable TI you will fully use.**

- Rentable square feet: **10,000 × 1.12 = 11,200**.
- Year-one base rent: **11,200 × $30 = $336,000**. Five years with escalation: about **$1,783,000**.
- Op-ex: **11,200 × $8 = $89,600/yr**, ~**$475,000** over five years (with escalation).
- Free rent: 4 months ≈ **$112,000** credit.
- TI: **10,000 × $30 = $300,000** credit (fully used).
- All-in five-year cost: ~**$1,783,000 + $475,000 − $112,000 − $300,000 = ~$1,846,000**.
- Per usable square foot per year: **~$36.9**.

In this case Offer A wins on NER (~$34.5 vs ~$36.9) — but only because we **added the NNN op-ex** to B and **corrected for the load factor** on A. Change the inputs (a bigger TI, a lower op-ex estimate, a worse load on A) and it flips. The point is not which number won; it is that **you cannot know until you build both stacks** to the same per-usable-square-foot unit.

```mermaid
graph LR
    A[Offer A: $28 gross] --> C[All-in NER ~$34.5/usable sf/yr]
    B[Offer B: $30 NNN] --> D[All-in NER ~$36.9/usable sf/yr]
    C --> E[Lower NER wins - here, Offer A]
    D --> E
    E --> F[Decision driven by load + op-ex, NOT face rent]
```

## What Else To Weigh Beyond The Number

NER decides most of it, but a few non-dollar factors can justify paying a higher NER:

- **Operating-expense risk.** A **gross** lease caps your exposure; a **NNN** lease passes through increases. If the NNN deal lacks a **CAM cap** and a strong **audit right**, its real cost is uncertain and riskier than the model shows. (A capped, auditable NNN is much safer.)
- **Build-out time and downtime.** A move-in-ready space saves months of rent-paying-while-dark. Factor any **double-rent or downtime** into the comparison.
- **Lease flexibility.** Renewal options, expansion rights, termination/kick-out clauses, and sublease/assignment rights have real value and differ between offers.
- **Location and logistics.** Dock access, parking ratio, and commute affect operations and staff — secondary to NER, but tiebreakers.

Always model the **CAM cap and audit right** alongside NER for any NNN offer; an uncapped NNN deal can drift well above its modeled NER.

## FAQ

**What number actually decides between two lease offers?**
**Net effective rent (NER)** — total cost over the full term minus every concession, divided by **usable** square feet and the number of years. Face rent is meaningless because it omits NNN charges, the load factor, escalations, free rent, and TI. Build the all-in stack for each offer, convert both to **dollars per usable square foot per year**, and the lower NER wins.

**How do I compare a gross lease to a triple-net lease?**
Convert them to the same unit. In a **gross** lease, operating expenses are included; in a **triple-net (NNN)** lease, add **taxes, insurance, and CAM** — typically **$8 to $15 per square foot per year** — on top of base rent. A $28 NNN rate can be **$38+ all-in**, so you must add the op-ex estimate to the NNN offer before comparing it to the gross one.

**What is the load factor and why does it matter?**
The **load factor** is the markup from **usable** square feet (space you can occupy) to **rentable** square feet (what you pay rent on, including shared common areas), commonly **10% to 20%**. At a 20% load you pay for 1,200 rentable feet to use 1,000; at 12%, only 1,120. Two offers with the same face rate but different loads can differ by **$3 to $6 per usable square foot** in real cost.

**Should I ever pick the higher-NER offer?**
Sometimes. A **gross** lease caps your operating-expense risk, so a slightly higher gross NER may beat a lower **uncapped NNN** NER once you account for pass-through risk. Move-in-ready space that avoids months of build-out downtime, plus better renewal, expansion, and termination rights, can also justify a higher NER. Model the **CAM cap and audit right** before trusting any NNN number.

## Sources

- CBRE, "Net Effective Rent: How to Compare Lease Proposals on an Apples-to-Apples Basis."
- JLL, "Gross vs. Net Leases and the Load Factor — A Tenant Comparison Guide."
- Cushman & Wakefield, "Lease Economics: Concessions, Escalations, and Effective Rent Benchmarks."
- BOMA International, "Standard Method for Measuring Floor Area and the Load/Add-On Factor."
- NAIOP, "Operating Expense Pass-Throughs and Net Lease Cost Structures."
- IREM, "Lease Concession and Effective Rent Calculation Standards."
- Tenant-rep broker commentary on normalizing gross and NNN offers to dollars per usable square foot.

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How Do I Compare Two Lease Offers on a True All-In Basis?

How Do I Compare Two Lease Offers on a True All-In Basis?

Direct Answer

Why The Headline Rent Lies

Build The All-In Stack — Component By Component

A Worked Comparison — Watch The Flip

What Else To Weigh Beyond The Number

FAQ

Sources

What does the score mean?