What is the Diff. Between Market Rent and Economic Rent?

[Michigan CG]

Pittsburgh Pete says:

I'll save you the effort--however, for future reference a copy of the Dictionary of Real Estate should be afixed to the corner of your desk for just such an occasion.

The CD version is a great tool for putting definitions in appraisals.

Market Rent
The most probable rent that a property should bring in a competitive and open market reflecting all conditions and restrictions of the specified lease agreement including term, rental adjustment and revaluation, permitted uses, use restrictions, and expense obligations; the lessee and lessor each acting prudently and knowledgeably, and assuming consummation of a lease contract as of a specified date and the passing of the leasehold from lessor to lessee under conditions whereby:
1. Lessee and lessor are typically motivated.
2. Both parties are well informed or well advised, and acting in what they consider their best interests.
3. A reasonable time is allowed for exposure in the open market.
4. The rent payment is made in terms of cash in United States dollars, and is expressed as an amount per time period consistent with the payment schedule of the lease contract.
5. The rental amount represents the normal consideration for the property leased unaffected by special fees or concessions granted by anyone associated with the transaction.

Economic Rent
In appraisal, a term sometimes used as a synonym for market rent.

Government agencies typically ask for net, triple net, or absolute net leases.

That is not my experience.....most government leases I see are Gross leases.....but I did find one Monday that was an absolutely net lease.

 

[Howard Klahr]

Tim is correct in regards to most Federal government leases and on many occasions state government leases. Not only do the prefer gross leases but even in markets where tenants are billed for electric the government often prefers this included in rent as well. The peculiarities here often relate to how specific programs are funded.

Most government leases are not negotiated in the open market in the same way as a typical lease, but rather are based on an RFP process which is then supported by a third party opinion regarding market rent levels (i.e. the engagement that generated the OP)

It would probably be beneficial to go through the real estate procurement regulations for GSA and your state procurement dept/division to better understand the process.