Depending on the city you are in and type of commercial lease (e.g. retail, office, warehouse, etc) commercial leases use various price per square foot pricing methods. The type of commercial lease calculation method you use is also often related to the type of business you have. Below are a few examples on how to calculate price per square foot in commercial leases.
Calculating Price Per Square Foot in a Commercial Lease
Let’s say rent is $xx.xx per square foot for the commercial rental space. You will typically see this quoted as an annual rate or a monthly rate.
- Example with a yearly price per square foot: A 3,000 sf office space has a yearly asking rental rate of $25 per square foot. 3,000 x $25.00 = $75,000 per year for rent. Divide by 12 months to get a monthly rental amount of $6,250.
- Example with a monthly price per square foot: 3,000 sf retail space has a monthly asking rental rate of $2.083 per square foot. 3,000 x $2.083 = $6,250 per month for rent. Multiply by 12 months and you get a yearly rental amount of $75,000.
As you can see the yearly rate of $25 per square foot is the same as the monthly rate of $2.083 per square foot. When negotiating commercial leases it’s important to know the difference between the two so you calculate your rent correctly when comparing alternative properties.
Also keep in mind that in most cases, in addition to the base rent you will also be responsible for paying your share of the operating expenses, which are also known as the Triple Nets or NNN. The NN are estimated at the beginning of each year and each tenant pays exactly the same NNN per square foot as those are not negotiable.
If you have any questions about how to calculate price per square foot in commercial leases don’t hesitate to contact us.