When you lease commercial real estate the rental amounts are typically quoted on a monthly or annual cost per rentable square foot. This is typically determined by the market you are in, the type of property, and the landlord preference.
- Office Rents – Are mostly quoted on an annual basis. This can be as a gross rate (e.g. $25 sf) or on a triple net (NNN) basis (e.g. $15 + $10nnn…. which equals $25 sf)
- Retail Rents – Can be quoted on a monthly or annual basis. (e.g. $2.50 sf per month or $30 sf per year)
- Warehouse Rents – Also are quoted on a monthly or annual basis. I just depends on the landlord preference and market. (e.g. $0.60 sf per month or $7.20 sf per year.
Here is the Formula
Rentable Square Feet X Annual Rate Per Square Foot = Annual Rent / 12 = Monthly Rent / Rentable Square Feet = Monthly Rate Per Square Foot
Here is an Example
2,000 SF X $20 SF per year = $40,000 / 12 = $3,333 per month / 2,000 = $1.67 Sf per month
Before you sign a contract make sure you understand how the rent is calculated and what your total monthly and yearly cost will be.
