The headline rent is the rate written in the lease and quoted in market reports; the effective rent is what the tenant really pays on average once incentives – rent-free months, fit-out money, stepped rents – are spread over the term. The two can sit 10 to 20 per cent apart on the same deal. Landlords defend the headline because valuations key off it; occupiers should compare offers only on the net figure.
Two prices for the same lease
Every negotiated lease has two prices. The headline rent – also called face rent – is the rate the parties sign and the market gets told: the euros per square metre per month printed in the lease schedule. The effective rent is the average rate the tenant actually pays across the term once every incentive is counted in: months of rent-free period at the start, a landlord contribution to the tenant’s works, a rent that steps up in later years. CBRE’s New Zealand team put the distinction plainly in a 2021 piece on rental incentives: face rent is the agreed rate “without incentive adjustments”, while the effective figure is the rental value the landlord actually receives once the giveaways are netted off. The concept matters in every market, Slovakia included, because almost everything publicly reported about rents – broker quarterlies, prime rent series, comparables – is quoted at headline level. The real price of a deal lives one calculation deeper.
The arithmetic: how incentives melt the headline
The calculation is short division – our own worked example, not a market quote. Take 10,000 square metres at a headline of EUR 5.00 per square metre per month on a five-year term: 60 months at EUR 5.00 is EUR 300 per square metre of total rent. Grant six months rent-free and the tenant pays only 54 months – EUR 270 – which, spread over the same 60 months of occupation, averages EUR 4.50: ten per cent below the signed rate. Add a fit-out contribution of EUR 30 per square metre and another EUR 0.50 per month melts away, bringing the net effective figure to EUR 4.00 – a full fifth below the number in the lease. Two deals with identical headlines can therefore be priced very differently, and the cheaper-looking offer is frequently the dearer one. The comparison discipline is mechanical: total rent over the term, minus every incentive with a cash value, divided by the months of the term – and always measured to the same point, either the full term or the first break option, never a mix.
Why landlords defend the headline
If the tenant gets the same discount either way, why does the landlord care whether it arrives as a lower rate or as free months? Because the building’s value keys off the contracted rent. As our yield entry sets out, at a 6.00 per cent prime yield one euro of provable annual rent is worth roughly 17 euros of capital value – so a rate cut does not just cost income, it marks down the asset and everything financed against it. Incentives deliver the tenant’s discount while leaving the valuable number intact, which is why, as CBRE’s incentives piece observes, landlords “want to keep getting the same or a higher rent per square metre” and would rather offer more incentive than concede the rate. The headline also anchors the next negotiation: it feeds the comparables other tenants and valuers see, and it is the base from which indexation compounds each year. None of this is sinister – it is how institutional real estate is valued – but it explains a negotiating pattern every occupier meets: the rate is defended stubbornly while free months and fit-out money move with surprising ease.
The Slovak angle: published rents are headline rents
Read the Slovak market reports with this lens. The Q1 2026 figures – prime rent at EUR 5.95 per square metre per month, up 3 per cent year on year, and the average at EUR 4.55, down 6 per cent (CBRE data via Property Forum) – are headline series; Cushman & Wakefield’s own series puts prime at EUR 5.30, a reminder that even headline levels differ by broker definition and only trends within one series compare cleanly. What no Slovak series publishes is the incentive layer, and that is where a softening market actually moves first: landlords concede rent-free months and bigger fit-out packages long before they print a lower rate. With renegotiations making up 53 per cent of Q1 leasing activity, most “new” Slovak deals are exactly the situation where the rate stays polite and the incentives do the talking. One more asymmetry deserves attention: incentives are one-off, while the rate compounds. A rent-free month is spent the day it ends; a lower headline is uplifted by indexation every year of the term. Tenants with long horizons should push the rate; tenants who value early cash flow should push the incentives.
How occupiers should use it
Three habits turn the concept into money. First, negotiate the whole package in the heads of terms, not sequentially: rate, rent-free, fit-out contribution, indexation basis and term belong on the table together, because they are one price wearing five costumes. Second, compare competing offers only on the net effective figure over the same horizon – to the first break option if you may use it, to full term if you will not – and insist every incentive is written with a cash value and a payment trigger. Third, read the clawback: leases routinely make incentives repayable if the tenant exercises a break or defaults early, which quietly converts the discount into a contingent debt; the repayment schedule should amortise, not spring back in full. And a final honesty check for both sides: the net figure is a comparison tool, not a market index. Nobody publishes it, every deal’s version is confidential, and the only reliable way to know where it sits this quarter is to be in the deals – or to ask someone who is.
Frequently Asked Questions
What is the difference between headline rent and effective rent?
The headline is the contracted rate in the lease; the effective figure is the average the tenant really pays once rent-free periods, fit-out contributions and rent steps are spread across the term. The headline feeds valuations and market reports; the net figure is what the deal costs.
How do I calculate it?
Total rent payable over the term, minus the cash value of every incentive, divided by the months of the term. Measure competing offers over the same horizon – full term or term to first break – and state whether service charge is included; mixing conventions is the classic comparison error.
Is prime rent a headline or an effective figure?
Headline. Prime rent series track the top achievable contracted rate for the best space, before incentives. That is why a market can report rising prime rents while deals get quietly cheaper through fatter incentive packages – the two statements are compatible.
Why not just ask for a lower rent instead of incentives?
Landlords resist because the contracted rate drives the building’s valuation and its financing – at typical yields each euro of annual rent carries many euros of asset value. A tenant asking for rate instead of incentives is asking for the more expensive concession and should expect to trade something for it, usually term.
Do incentives have to be repaid if I leave early?
Often, yes. Clawback clauses commonly make rent-free months and fit-out money repayable in whole or part if a break option is exercised or the lease ends early. Check the trigger and insist the repayable amount reduces over time rather than remaining at 100 per cent.