Ask a Broker
In residential leasing, the concept of rent rates may seem fairly straightforward, but for commercial property, it can be expressed in different terms. That’s why a common question that our brokers are asked is “What does price per square foot mean versus monthly” when it comes to rent rates? In this month’s Ask a Broker series, Pickett Sprouse brokers help to answer that question and to explain why it’s an important distinction.
For investors and/or landlords, rent rates are expressed on an annualized basis in order for them to better analyze the investment performance on their property. At the same time, we understand that generally for the user, they are looking at monthly costs. That’s why we also express rent rates on a per month basis. This helps to make it clear what the tenant’s obligations will be.
Price per square foot is the annualized way of looking at the cost. If a property is 1,000 SF and $10 per square foot, it means you're paying $10 per square foot per year for that space. That would be $10,000 a year or $833 per month.
1,000 x $10 = $10,000
$10,000 / 12 = $833 per month
The price per square foot is usually the initial cost to lease a property for a year. You would divide that by 12 to calculate the base monthly rent. There are also other costs that may increase your monthly rent. Tenants may be responsible for taxes, insurance, common area maintenance, utilities, upfit, etc. The structure of the lease greatly effects what your true cost is per month.
If you have a unit that is 1,000 square feet and rents for $12/SF, you multiply 1,000 square feet by $12/SF. This gives you an annual rent of $12,000 per year. Then if you divide $12,000 by 12 months this gives you your monthly rent amount of $1,000/month.
1,000 x $12 = $12,000
$12,000 / 12 = $1,000 per month
How to ask us a question
Our brokers will be answering your questions every month through the Ask a Broker series. If you have a commercial real estate question that you want answered, we’d love to hear from you at email@example.com.