Most commercial real estate listings are priced per sq. ft. often separating base rent and additional rent. This often looks odd and confusing to the average person.
I get asked by many clients, used to seeing easy to decipher residential listings for lease, how to figure out monthly rents for commercial properties.
I have listed below a simple basic guide to calculating commercial real estate rents using 1,000 sq. ft. space as an example:
1 – Add the per square foot base rent and additional rent together. Base rent is also called net rent, additional rent can also be commonly known as CAM or TMI. If, for example, you have a base rent of $20 per sq. ft. and additional rent of $10 per sq. ft., that is a combined total of $30 per sq. ft.
2 – Multiply the combined total above ($30) by the number of square feet (1,000) that make up the space in the example to get the total annual rent. That would be $30 multiplied by 1,000 for a total of $30,000 annual rent.
3 – Divide the annual total rent ($30,000) by 12 to arrive at the total monthly rent. So, $30,000 divided by 12 is $2,500.00 monthly. In the province of Ontario commercial real estate rents are subject to 13% HST (Harmonized Sales Tax) which gets added to the total. In this situation 13% of $2,500 is $325.00 for a total monthly rent of $2,825.00 .
Please note, most commercial rents do not include utilities so it would be good to clarify that with your listing agent if it is not clear in the advertising. Some listings advertise gross rent instead of base + additional, this means that the listed number is the combined total of base and additional.
If you are looking for commercial space to lease, please make sure you are working with an agent that clearly understands this concept to avoid unpleasant surprises.