Commercial Lease Rate Calculator
Calculate your annual or monthly square footage rates instantly.
Annual Rate per Sq. Ft.
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Monthly Rate per Sq. Ft.
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How to Calculate Square Footage Lease Rates
Understanding how to calculate square footage lease rates is essential for business owners, real estate investors, and commercial brokers. In commercial real estate, rent is typically discussed in terms of an annual price per square foot rather than a flat monthly fee.
The Standard Formula for Lease Rates
To calculate the annual lease rate per square foot, you need two primary numbers: the total usable square footage of the space and the total monthly rent amount.
Formula: (Monthly Rent × 12 Months) ÷ Total Square Footage = Annual Rate Per Square Foot
Step-by-Step Calculation Example
Imagine you are looking at a retail space that is 1,200 square feet, and the landlord is asking for $3,000 per month in base rent.
- Step 1: Find the annual rent ($3,000 × 12 = $36,000).
- Step 2: Divide the annual rent by the total square footage ($36,000 / 1,200).
- Result: The lease rate is $30.00 per square foot per year.
Understanding Different Lease Types
When calculating rates, it is crucial to know what expenses are included in that square footage price:
- Full Service Lease: The rate includes utilities, taxes, insurance, and maintenance.
- Triple Net (NNN): The rate is lower, but the tenant pays for taxes, insurance, and maintenance separately.
- Modified Gross: The rate includes some, but not all, building expenses.
Why Calculate Per Square Foot?
Commercial real estate professionals use the price per square foot to compare different properties objectively. A space that costs $5,000/month might seem expensive compared to one at $4,000/month, but if the $5,000 space is 3,000 square feet ($20/SF) and the $4,000 space is 1,500 square feet ($32/SF), the larger space is actually the better deal on a unit-price basis.
Frequently Asked Questions
Is the "Usable" or "Rentable" square footage used?
Most landlords calculate the rate based on "Rentable Square Footage," which includes your private space plus a portion of shared common areas like lobbies or hallways.
Most landlords calculate the rate based on "Rentable Square Footage," which includes your private space plus a portion of shared common areas like lobbies or hallways.
How do I convert an annual rate to a monthly payment?
Multiply the square footage by the annual rate, then divide by 12. For example, 2,000 SF at $24/SF is $48,000 per year, or $4,000 per month.
Multiply the square footage by the annual rate, then divide by 12. For example, 2,000 SF at $24/SF is $48,000 per year, or $4,000 per month.