How is Commercial Real Estate Rent Calculated?

How is Commercial Real Estate Rent Calculated?

When looking to rent commercial real estate most people look at the monthly rental fees and quickly eliminate those out of their price range. As you peruse listings you will see various options, but there is also a huge range in the cost. It’s important to consider the factors that go into calculating commercial real estate rent as you make your final decisions. As a commercial property owner, it’s important to know all the factors to include as you set rent on your buildings. Today we’re answering the question “How is commercial real estate rent calculated?”

What Is Usable Square Feet Versus Rentable Square Feet

Most office leases are based on rentable square feet, but it’s important to understand that the space you rent may be more than what you actually use. Usable square feet includes your office space, private bathrooms, closets, and any other space that is only available to your company.

Rentable square feet include common areas available to all tenants, such as conference rooms, kitchens, and bathrooms. Pay close attention to the usable square feet available. You may need more usable square feet than the rentable square feet if you have more employees. The quickest way to make sure you are able to accommodate your employees is with a floor plan.

How Is Commercial Real Estate Rent is Calculated?

Square Footage Lease

Some landlords base the monthly rent on the square footage. For example, a 2,000 square foot office based on $10.00 per square foot would equal $20,000 per year. Divided monthly, this would cost $1,666 per month. Plus add in the cost of utilities and repairs.

Percentage Lease

It can be common practice for retail locations to pay a base rate and then a percentage of sales. Some landlords require a percentage after a certain amount of gross sales and other landlords start charging after the first initial sale. This method gives retail locations a break when sales are lowering, such as during the winter. It also ensures that the landlord makes enough to cover the mortgage and building costs over time.

Full Service, Gross, or Net Rent

Full service rent includes electric, water/sewer, dumpster, janitorial, real estate taxes, building insurance, maintenance, and base rent.

Gross rent includes real estate taxes, building insurance, maintenance and base rent.

Net Rent tenant pays the base rent, and then the actual cost for utilities, taxes, insurance, maintenance, janitorial, dumpster, are paid directly or as a pass thru based on actual cost to Landlord.

The amount of rent you charge is a large factor in which commercial properties are the best investments. At Ullian Realty we have over 50 years of combined experience locally serving Brevard County. Contact us to learn more about how we will help you find the best investment property.