Why Base Rent Alone Does Not Tell the Whole Story
Tenants who compare offers based solely on the rent per square metre are usually making decisions based on incomplete information.
Two buildings offering exactly the same headline rent can differ in their actual occupancy cost by more than 10% — depending on service charges, the amount of fit-out financed by the landlord, rent-free periods and the applicable indexation mechanism.
This is why market offers are commonly compared using effective rent — the average cost of occupancy after taking into account incentives and additional costs.
Components of the True Cost of Occupancy
Base Rent
The basic rate charged per square metre of office space, typically denominated in EUR and payable monthly.
Service Charge
The cost of operating and maintaining the building’s common areas and services, including security, cleaning, reception, technical maintenance, insurance and property management.
In Warsaw Class A office buildings, service charges typically range between PLN 25–35 per m² per month and can have a significant impact on the total occupancy cost.
Utilities
Electricity, heating, cooling and water consumed within the tenant’s premises, usually charged based on sub-meter readings or allocated according to the occupied area.
Parking
Underground and above-ground parking spaces are normally charged separately, typically in EUR per space per month.
In the centres of major cities, the monthly cost of a single parking space can be equivalent to the base rent for several dozen square metres of office space.
Fit-Out
The cost of preparing the office for occupation, including partition walls, ceilings, flooring, lighting, installations and furniture.
Part of this cost may be financed by the landlord through a fit-out contribution. Any difference between the total project budget and the landlord’s contribution is borne by the tenant — either as an upfront CAPEX cost or, in some cases, through a higher rent.
Rent-Free Periods
Months during which the tenant does not pay rent or, depending on the agreed terms, service charges.
Rent-free periods effectively reduce the average occupancy cost over the entire lease term.
Indexation
Annual adjustment of the rent, typically based on HICP for EUR-denominated rents or CPI for PLN-denominated rents.
Over a multi-year lease, the cumulative impact of indexation can exceed 10%.
Additional Costs
These may include:
- storage and ancillary space,
- terraces and balconies,
- charges for HVAC operation outside standard building hours,
- marketing charges in certain mixed-use developments.
Effective Rent — How to Calculate It
Effective rent represents the average monthly cost of occupancy over the entire lease term after taking into account all financial incentives and additional costs.
A simplified calculation can be performed as follows:
- Add up all rent and service charge payments over the entire lease term.
- Deduct the value of rent-free periods and other financial incentives.
- Add any fit-out costs not covered by the landlord’s contribution.
- Include projected rent indexation on a year-by-year basis.
- Divide the resulting amount by the number of months in the lease term and by the number of square metres occupied.
The result is a comparable rate that allows different offers to be assessed on a like-for-like basis, regardless of how their incentive packages are structured.
The Most Common Calculation Mistakes
Comparing Offers Based Only on Base Rent
This ignores service charges, parking and incentives — often the very elements that create the greatest difference between competing buildings.
Ignoring Indexation
For leases with a term of five to seven years, cumulative indexation can increase the overall cost by 10–15%.
Underestimating the Fit-Out Budget
Fit-out standards — particularly for IT infrastructure and acoustics — continue to increase. A budget prepared several years ago will often no longer reflect current market realities.
Failing to Budget for Reinstatement Costs
Some leases require the tenant to restore the premises to their original condition at the end of the lease.
This represents a real future liability and should be taken into account from the outset.
What Does an Accurate Cost Calculation Give You?
A professional cost analysis provides:
- comparable financial offers across different buildings,
- a stronger negotiating position with the landlord,
- a reliable multi-year occupancy budget for Management and Finance,
- a sound basis for deciding whether to renegotiate, relocate or sublease.
Summary
The true cost of an office is much more than its headline rent.
Only by calculating the effective rent and total occupancy cost can you properly compare competing offers and determine whether your existing lease is genuinely competitive.
If you are planning a lease renegotiation or relocation within the next 18–24 months, now is a good time to review the full cost of your existing office.