What is the difference between loss to lease and concessions?

"Loss to lease" and "concessions" are both terms used in real estate, particularly in the context of rental properties, but they refer to different concepts:

  1. Loss to Lease: This term represents the difference between the actual rent income received and the potential rent income that could be earned at market rates. For instance, if a property is leased at a rate lower than the current market rate (perhaps due to an existing long-term lease), the difference between the actual rent collected and what could potentially be collected at market rate is the loss to lease. It reflects a loss in revenue due to not charging the maximum possible rent.
  2. Concessions: These are incentives or discounts provided by a landlord to a tenant, often used to attract tenants or encourage lease renewals in a competitive market. Concessions can include things like a month of free rent, reduced rent for a certain period, or paying for tenant improvements. These are direct costs or reductions in revenue for the landlord but are used as a strategy to maintain higher occupancy rates or secure long-term leases.

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