Understanding Rental Rates

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Here we've simplified a summary of rental rates and calculating the monthly cost of space.

Other factors that determine the effective monthly rent include:

  • Tenant improvement costs
  • Free-rent
  • Abated rent
  • Amortization schedules

Rental rates are also called “Asking Rents” or “Lease Rates.”

Industrial Rental Rates

Industrial properties are quoted differently than Retail and Office. Industrial space is quoted on a per square foot, per month basis. Also, Industrial spaces typically have two components: a portion of the space that is considered “warehouse” and another portion that is “office.” Each portion of the space is calculated at a different rate.

Calculation: (Whse SF * Whse Rate) + (Off SF * Off Rate) = Monthly Rent

Example:

Unit A is 10,000 SF total.

9,000 SF is Warehouse (whse) at $0.45/SF per month: 9000 * 0.45 = $4050/mo

1,000 SF is Office space (off) at $0.90/SF per month: 1000 * 0.90 = $900/mo

10,000 SF Total. The combined rate is called the “Blended Rate”: $4,950/mo

Office and Retail Rental Rates

Rates for Office and Retail space are quoted on a per square foot/per year basis.

Calculation: (SF * Rate)/12 months = Monthly Rent

Example:

Unit A is 2,000 SF at $15.00/SF per year: (2000 * 15)/12 = $2,500/m