How To Calculate Commercial Rent

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When comparing commercial spaces to one another it’s important that you know how to calculate commercial rent so that you can budget appropriately for your business. The last thing you want to do is sign a lease and find out after that you miscalculated and blew your budget.

It can be confusing sometimes because commercial rental rates can be quoted differently depending on the city you live in or who owns the property.

For example one commercial landlord may quote a monthly rental rate (e.g. $1.00 sf per month) while another may quote a yearly rental rate (e.g. $12.00 sf per year). In most cases commercial industrial warehouse spaces are typically quoted as monthly rates and office & retail spaces are quoted as yearly rates. Sometimes you will find industrial spaces quoted as yearly rates as well.

In the example above $1.00 per month is the SAME as $12.00 sf per year. Now keep in mind most commercial properties are triple net (NNN) leases, meaning in addition to the base rent you also have to pay your portion of the operating expenses (taxes, insurance, maintenance). Loopnet can be a bit misleading sometimes because that website typically only shows the base rent. In most markets like Austin, Tx you will also be responsible for the NNN). If you don’t know make sure you ASK and find out ALL the costs that you will be responsible for. Let’s take a look below at how to calculate commercial rent when landlords are quoting either a monthly or yearly rental rate.

Calculating the monthly commercial rent

Lets say you want to rent 5,000 sf of commercial Industrial space in South East Austin and the landlord is quoting $1.00 sf per month.

• 5,000 x $1.00 = $5,000 per month

Calculating the yearly commercial rent

This time let’s take a 5,000 sf commercial warehouse space in South Austin that the landlord is quoting $12.00 sf per year.

• 5,000 x $12.00 = $60,000 per year. 
• $60,000 / 12 months = $5,000 per month

Again, as you can see $1 sf per month is the same as $12 sf per year. Also make sure to ask the landlord if you are also responsible for paying the NNN costs. In most industrial markets you will have to pay those as well as the base rent. It’s important that you know how to to calculate commercial rent so you can create a realistic budget for your business. One mistake can cost you thousands! 

If you have any questions feel free to contact us.

 

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