Free Rent (Rent Abatement): NYC Office Leasing, Explained

Q: Why not just lower the rent instead?

Building valuations key off face rent, so landlords protect it. Tenants should not care: negotiate the package, then compare deals on net effective rent.

Free rent, written into most New York leases as rent abatement, is a run of months, almost always at the front of the term, in which the tenant pays no base rent. Landlords grant it because it sweetens the deal without cutting the face rent that values their building. On NYC office deals, one month of free rent per year of term is a common shape, more when space needs work. Free rent compounds with TI and escalations into the effective rent, the number that actually matters.

Updated 2026-09-30 · NYC leasing glossary · Nomad Group

Worth knowing

These shapes and figures are patterns from our tenant-side work, not guarantees; abatement mechanics differ lease to lease, so confirm the clause on the specific lease before relying on any number here.

How free rent actually works in a New York lease

The concession lives in its own abatement clause, and the drafting decides what the months are worth. Most New York office leases abate base rent only, while additional rent, meaning escalations and electricity, keeps accruing through the free period, so a month of free rent is rarely a month of zero cost. The gap between the lease commencement date and the rent commencement date carries real money as well, because possession to build out before rent starts is a different concession from free months that merely cover the construction period.

Most abatements are also conditional. Standard drafting suspends or revokes the free months if the tenant is in default, and some leases make every abated dollar repayable years later. Confirm on the specific lease which charges are abated and when the clock starts.

A worked example on the citywide median

The citywide median asking rent on our book is $75 per square foot per year. Take a five-year term at that number with one month of free rent per year of term, which produces five free months across a sixty-month lease. The tenant pays base rent for fifty-five of the sixty months, so the net effective base rent is $72 times fifty-five divided by sixty, $66 per square foot per year.

The face rent never moved. The landlord's rent roll still says $72, the appraisal and the lender still see $72, and the tenant's actual cost fell by just over eight percent before TI and escalations enter the math. That is the whole logic of the instrument.

What is negotiable, and where we push

Almost everything about the abatement is negotiable, starting with the count of months, which grows when the space needs work, when the floor has been sitting, or when the landlord is holding face rent high. We also push on scope, asking the abatement to reach electricity and escalations, and on placement, since a tenant funding a buildout may want the months front-loaded for cash flow while another is better served spreading them across the term.

Free rent also trades against the rest of the package. A landlord short on capital may offer extra months in place of TI dollars, and whether that trade favors you depends on your construction budget and cash position. All of this is argued for you on a tenant-only mandate; Nomad represents tenants exclusively, never landlords.

The traps that cost tenants money

The expensive mistakes cluster in four places. First, the clawback, a clause making the entire abated amount repayable on any default; we push for repayment that burns off over the term or triggers only after notice and a chance to cure. Second, free months that overlap the buildout period, since months you could not have occupied anyway are not a real concession. Third, base-rent-only drafting that leaves electricity and escalations running while the headline says free.

Fourth, and most common, comparing deals on face rent. A higher face with generous abatement can beat a lower face with none, and the only honest comparison is net effective rent with free rent, TI, and escalations folded in. Run that math on every option before you count the months as money.

Why not just lower the rent instead?

Building valuations and lender covenants key off face rent, so a landlord would rather hand you months at zero than shave the stated number. Tenants should not care which lever moves: negotiate the package, then compare deals on net effective rent.

Who negotiates this for the tenant?

A tenant-side broker does, and the mandate matters, because a broker who also represents landlords has a reason to protect face rent. Nomad represents tenants exclusively, never landlords, across 300+ delivered New York offices.

How much free rent is typical on a New York office deal?

One month of free rent per year of term is the common shape we see, and the number climbs when the space needs work or the floor has sat vacant. Treat that as a starting point, not a ceiling.

Does free rent cover electricity and operating escalations too?

Usually not. Most abatement clauses forgive base rent only, while electricity and escalations keep running through the free months, so confirm on the specific lease exactly which charges are abated. Extending the abatement to electricity is a live ask on many deals.

Can the landlord take the free rent back?

Many leases carry a clawback that makes abated rent repayable if the tenant defaults, sometimes in full rather than a share that burns off over the term. We push to soften that language before signing.