Articles / Market research
Asking rent vs effective rent for Malta offices
Compare rent-free periods and incentives using an effective monthly rent calculation.
Edition
Worked lease example
A 36-month lease at €8,000 per month with three rent-free months costs €264,000 in base rent over the term. Divide by 36 for an effective base rent of about €7,333 per month. A €12,000 landlord contribution would reduce the tenant’s modelled net cash cost to €252,000, equivalent to €7,000 per month before other charges.
What to record in a signed-deal study
Compare the advertised rent and the signed rent for the same unit and area basis. Record stepped rents, incentive timing, included services and lease term. This illustration uses nominal cash totals and excludes discounting, VAT and service charges. No signed-deal averages are presented.
Start with the cash schedule
Take the written offer and list when each rent payment falls due. Record the first payable month, later increases and any payment required in advance. A rent-free period at the start improves early cash flow. A credit late in the term changes the total but has a different cash-flow effect. Compare offers over the same intended occupation period and identify dates that are still negotiable. Ask for an updated schedule whenever an incentive or step changes.
Distinguish free rent from other charges
Ask whether a concession applies to base rent only. Service charges, utilities, parking and tax may follow a separate schedule. When comparing a rent-free month with a lower monthly rent, place each concession in its own row and include any qualifying conditions. An offer can look stronger on base rent while still requiring meaningful cash in the first month. A complete schedule should show when each cost starts and who invoices it.
Account for stepped rent
If rent increases partway through the lease, calculate the cost for each interval before adding the totals. For example, €6,000 per month for 12 months and €6,500 for the next 12 comes to €150,000 over two years, or €6,250 per month before incentives. An annual increase described in broad terms is worth clarifying in writing before modelling it. Record whether the uplift is a fixed step or linked to a published index or formula.
Treat contributions as conditional until agreed
A landlord contribution may be paid as cash, a credit against invoices, or works delivered by the landlord. Confirm what qualifies and when the benefit is received. For a reimbursement, note the evidence required and who funds the work initially. For delivered works, agree the specification and acceptance process. The model should value an incentive only once, especially when it appears both as a deduction in a budget and as part of a quoted rent package.
Compare terms beyond the average
A monthly average can hide differences in flexibility. Check break dates, notice requirements, escalation, reinstatement obligations and whether the concession is repayable if you exit early. Compare a scenario in which the team occupies for the full term with one in which it leaves at the earliest permitted date. Keep a refundable deposit separate from rent, while including it in the cash requirement at signing. Review the written terms with your advisers before committing.
Keep a clear record of the evidence
Identify the exact property reference, advertised area, original asking quote, signed base rent and incentive terms. When publishing anonymised comparisons, use consistent definitions and suppress details that could identify a tenant or deal. Separate worked examples from observed results and include the observation period for any measured figures. A sample drawn from deals handled by one agency describes that agency’s records, with results potentially shaped by the locations and types of clients in the sample.
Prepare a comparison your team can check
Use one row per proposal and one column per cost item. Put the recurring rent, incentive, fit-out contribution and total term in separate cells. Include the quote date and attach the original written offer. Then compute the average from the full payment schedule. A reviewer should be able to reconstruct the result without guessing whether rent was quoted monthly or annually, or whether an incentive was a payment or a deduction.
Know when to model timing in more detail
For larger or longer leases, the timing of a payment can matter alongside the nominal total. A finance team can compare cash flows on a consistent present-value basis using a disclosed discount rate. Keep that result separate from the simple monthly average so readers know what they are comparing. Use the same discount rate and cash-flow dates for all options. Recalculate if the landlord changes the timing of a credit or the start of rent.
Compare offers with different lengths
If one landlord offers a shorter lease, compare the costs over the period your business actually expects to occupy. A renewal or move after the shorter term may bring further costs, so label any assumptions about that period. When a firm renewal price is unavailable, show a range instead of a single precise figure. Keep the shorter contractual commitment visible alongside the cost comparison.