How is Commercial Real Estate Rent Calculated?

How is Commercial Real Estate Rent CalculatedWhen 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.

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