Definition
The full open market rental value of a property if let on normal commercial terms without any premium, rent-free period, or discount. Rack rent is the benchmark used by valuers to assess the investment value of commercial and mixed-use properties. Lenders use rack rent to calculate interest cover ratios and assess the viability of investment or refinancing proposals.
See also
Closely related terms.
Gross Yield
The annual rental income from a property expressed as a percentage of its purchase price or market value, before deducting any expenses.
Net Yield
The annual rental income from a property expressed as a percentage of its purchase price or market value, after deducting all operating expenses such as management fees, maintenance, insurance, and void periods.
ICR (Interest Cover Ratio)
A measure of how comfortably a property's rental income covers the interest payments on a loan, calculated as annual rental income divided by annual interest costs.
Valuation
A professional assessment of a property's market value, carried out by a qualified surveyor for lending, investment, or transactional purposes.
Further reading
Guides that touch this term.
Guide
Commercial Mortgages in the UK: A Complete Guide
Everything you need to know about commercial mortgages in the UK - from eligibility criteria and rental coverage ratios to how lenders value multi-let properties and what lease length matters.
4 min read readReadGuide
RICS Red Book Valuations for Development: What Lenders Require
A comprehensive guide to RICS Red Book valuations in development finance, covering what lenders require, how valuations are structured, and how to ensure your scheme is accurately assessed.
11 min read readReadGuide
UK Development Finance Market 2026: Rates, Trends and Outlook
A comprehensive overview of the UK development finance market in 2026, covering current interest rates, lender appetite, emerging trends, and what developers should expect over the coming 12 months.
9 min read readRead
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