To calculate office space rent is not difficult. Isn’t all it takes to calculate the cost per square foot and multiply it? It’s a little more complicated than that. If you have any ideas for improving your office space, you must understand how to calculate the monthly fee accurately. You might be wondering how to calculate office space rent monthly.
You must first know the price per square foot of the office space before determining how much you will pay in rent for rental properties. Then divide it by the total square footage you are renting. Other elements do, however, come into play. For instance, whether the rental rate is monthly or annual or if rentable space is included.
Anyone exploring alternatives for office space should be able to compute the rent accurately. Hopefully, the article that follows will help to explain everything.
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Different Methods Of Calculate Office Space Rent
If you’re also wondering how to figure out the monthly rent for office space, there isn’t just one solution because many factors that affect rent rates can affect it.
Model For Annual And Monthly Rent
Annual Rent Model
The annual rent model is also one of the most widely used models for calculating office space rent. It’s pretty easy to do this. The area’s cost per square foot must be considered first. Let’s say the commercial tenants who want to rent a building have a yearly fee of $20 per square foot. And you require a space of about 2,500 square feet.
Therefore, $20 multiplied by 2,500 equals $50,000 in annual rent for such office space. This is the yearly rent you pay for that room, meaning the rent is about $4,000 per month. You would never, however, give your landlord $4,000 in this situation. You can choose between two instalment options to pay the entire cost.
Monthly Rent Model
However, if you have a monthly lease with your landlord, you will pay them $4,000 each in the example above. There will, however, be some extra costs for maintenance.
Rental Or Usable Space
Suppose you have suggestions for improving the retail space. Then you must know whether the rent estimate you received was based on rentable or useable space.
The amount of space set aside only for you is known as usable space. No one else has access to it besides you and your staff.
But a commercial space structure that rents office space also features common areas, such as hallways, corridors, restrooms, elevators, etc.
For instance, you can come up with other commercial real estate office space ideas. You would then require usable space. In other words, you won’t use rentable areas like the bathrooms and hallways too frequently. Thus, why pay for them?
Calculate Office Space Rent For Usable Space
You must, however, pay for the rentable space if you work in an office environment. For commercial rent calculation, the office building is 100,000 square feet. The common space, hallways, etc., take up the remaining 14000 square feet. The common area factor in this situation is 14%. Consider that you are leasing 2500-square-foot office space in this structure. Your portion of the common space will therefore be,
- Three hundred fifty square feet of the common area equals 2500 usable square feet times a common area factor of 14%.
- Your rentable space is therefore 2500 + 350 = 2850 square feet.
- The annual rent for this office space is 20 dollars per total square footage or 20 dollars multiplied by 2850 square feet, totalling 57,000 dollars (per year)
Advantages Of Different Rent Models
Each rental arrangement by a real estate broker has advantages and cons of its own. For starters, annual rent arrangements are unsuitable for newly established small firms.
- However, if you are a prominent business owner and have been in operation for some time, you might want to opt for an annual lease. It will allow you more wiggle room to negotiate a lower price. A tenant pays yearly rent and lets the landlord know you want to stay a long time. It strengthens the bonds between the parties, in turn.
- On the other hand, using an annual model for office base rent won’t be a good option if you don’t know how your firm will do in the next six months. Therefore, setting a monthly rate is the wisest line of action.
- Similarly, you must choose between a lease structure for usable or rentable space. For instance, your ideas for improving your office space can call for adding additional spaces. In that situation, your agreement must include extra rentable space.
- On the other side, you won’t need much rentable space if you want to use a work-from-home approach. Additionally, you can include that in your contract.
Lease Structure Types
You now understand how to figure out the monthly operating expenses of office space. In addition to this estimate, you must also consider your commercial lease calculation. There are typically three types of lease. They are the
- Triple net (NNN) (MG)
- Total service gross
- Modified gross
Triple Net (NNN) (MG)
The base and common area rent are distinct under a triple net system. As a result, it could alter depending on the situation. While some individuals might find this unsettling, many appreciate it because they can better estimate the upkeep costs.
Total Service Gross
The full-service gross structure, in contrast, offers a fixed cost. Therefore, base and shared area rent are not different. Due to the reduced bother, many tenants prefer this.
However, the landlord may make service compromises if necessary to maintain the same rent.
Both of the structures above are combined in the modified gross lease. You can pick one service to pay for separately from the base rent in place of all the common area and maintenance fees. This could be useful for tenants who have suggestions for different workplace spaces.
Setting the ideal rent agreement requires understanding how to calculate monthly rent for office space. Since not all landlords will keep their tenants’ best interests in mind.
Some people want to maximize their financial gain. Therefore, if you don’t know your stuff, your landlord might take advantage of you.
What kind of commercial real estate is being available for lease obtaining?
You can purchase a variety of commercial rental properties, including the following:
- Market place
- The Workplace
- Shopping centres
- Strip joints
How is the rent per square foot determined?
You can calculate by using the formula monthly rent/floor area (ft2) = rent per square foot.