Calculating Rates for Commercial Leases

If you are interested in leasing a specific commercial property, you need to know how to calculate the rate for it. In order to accomplish this, you must understand the aspects involved. In particular, you have to look at the specific factors. These include:

  • Duration of the lease
  • Property size
  • How much storage space
  • Location of the property, including its proximity to certain amenities or business-positive inducements
  • Current state of the economy – When it is good, commercial properties tend to rise; when it is low, the rates decrease

Pricing Methods For Commercial Properties

In addition to these aspects influencing the rates, you also need to look specifically at the kind of lease offered. There are 2 major types of leases. These are:

  • Rent Per square foot. This is the most common method of basing the rent. Calculations are for an annual or monthly rate. Square footage based on an annual calculation is common in California. Usually, an urban office is rated on an annual rate while industrial and retail urban space is calculated monthly.

In calculating, be sure you determine whether the square footage is usable or rentable space. Usable square footage is the actual space your commercial property occupies. Rentable square footage is the usable space plus the common areas utilized by all occupants of the building.

  • There is also a percentage lease. This type of lease is based on a minimum base rent. It comes in 2 variations. In one type, the base rent plus a percentage of the tenant’s total retail gross comprises the rate for a commercial lease. In the second form, the minimum base rent plus a percentage of the total gross receipts is the rental fee.

Other Factors To Consider

Once you know the means of calculation for the commercial lease, you need to look at other factors that will influence the total cost or rate. You must look at what is and what is not inclusive in the lease. Is the lease you are considering a gross lease, covering rent and utilities? Does it include NNN – Triple Net – a proportional share of such things as operating expenses, insurance and taxes for the entire building; what about common area maintenance (CAM) expenses?

Will You Need A Lawyer?

Due to the complexity of the calculations, it might be best to consult a real estate lawyer. This will guarantee you will know what you are actually paying for when you lease the property.

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