What Are Rent Concessions?
A rent concession is an adjustment or discount imposed by a landlord or property manager on the regular rent amount or security deposit fee. Rent concessions are also known as tenant credits, rent discounts, or simply write-offs. These discounts can be temporary or long-term, and generally serve the purpose of either incentivizing tenants to sign or renew leases or as a reduction of costs to the tenant in exchange for the execution of specific services.
In most cases, rent concessions are deployed as a marketing tactic or simply to combat vacancy. Landlords typically offer rent concessions to hook prospective tenants into signing leases in a competitive market atmosphere. Current tenants are also occasionally offered rent concessions by landlords as an incentive to renew a lease agreement rather than end their occupancy.
To better illustrate, one of the most commonly utilized rent concessions is the waiving of the first month’s rent for new tenants. While this may appear to be a big sacrifice to the asset’s income if done often, in reality, the longer a unit sits vacant, the less profit the asset can produce. The understanding being that the sacrifice of a month’s rent is far less than the overall expense of having a vacancy that can take many more months to fill. A similarly popular tactic is offering tenants whose leases are almost up a discounted month or two should they choose to renew.
Rent Concessions Vs. Rent Abatements
Rent concessions often get confused with rent abatements — though the two are deployed for wildly different reasons. In slight similarity to rent concessions, rent abatements are periods of time granted to tenants during which they are not required to pay rent, or must only pay a discounted portion of their rent. That, however, is where the similarities end. Unlike rent concessions, rent abatements are contingent on the property becoming uninhabitable for any number of reasons — most of the time, due to damages caused by natural disasters such as hurricanes, tornados, fires, or floods. If damages to the property are not able to be repaired in a timely manner, rent abatements may be granted up to the full costs of the repairs to the property, and this sometimes also covers the costs of temporary housing.