Calculating Rent

Most commonly, commercial real estate is quoted in terms of “per square foot” (PSF). In a rental situation, the rate will either be Net or Gross numbers (“Net PSF” or “Gross PSF”). If a rent is quoted on a net basis, this number does not include the tenant’s pro-rated responsibility of taxes or common area expenses (known as CAM). The CAM includes any work that is completed in the common area on behalf of the tenants of the building. For instance, CAM could be the snowplowing of the parking lot and sidewalks, landscaping of the exterior, insurance for the building, or the cleaning of common areas (lobbies, bathrooms, hallways, etc.). Each tenant is responsible for these charges passed on by the landlord. Gross rents on the other hand already include these numbers. Therefore, you may have a higher rent on a gross basis, but this will include your total monthly responsibilities. On the other hand, your net number will be smaller, but will not give you a clear picture of your budget.

To find out your monthly rent, you’ll take your gross rent (or your net rent plus taxes and CAM) and multiply that by the number of square feet you rent. This is your yearly rent expense, which divided by 12 will allot you your monthly rent. Let’s say the rent is $10.00 PSF Net with taxes at $2.00 PSF and CAM at $3.00 PSF. Therefore, your total PSF expense is $15.00 Gross. Now let’s pretend you are renting 2000 SF. 2000 x $15.00 = $30,000 yearly rent expense or $2,500 monthly rent expense when divided by 12.

To estimate how many square feet you may need, review our office space calculator.