Determining Commercial Real Estate Prices per Square Foot
Your comprehensive guide to understanding how much you'll pay for your next office space.
March 21, 2025 | by
Reviewed by real estate expert Jonathan Wasserstrum
Understanding the factors that influence commercial real estate price per square foot is crucial for businesses planning their office rent budgets. From calculation methods to lease structures, several elements play pivotal roles. Here’s a comprehensive guide to navigate these considerations effectively.
Calculating Your Rental Rate
Commercial real estate prices are typically quoted on an annual per-square-foot basis. To determine your monthly rental rate, use the following formula:
Annual Cost = Price per square foot × Total square footage
Monthly Cost = Annual Cost ÷ 12
Example:
If the rate is $50 per square foot for a 3,000-square-foot space:
$50 × 3,000 = $150,000 annually
$150,000 ÷ 12 = $12,500 per month
This calculation provides the base rent. Depending on the lease structure and whether the rate is based on usable or rentable square footage, additional costs may apply.
Usable vs. Rentable Square Footage
Understanding the distinction between Usable Square Footage (USF) and Rentable Square Footage (RSF) is essential when determining how much you’ll pay per square foot of office space:
Usable Square Footage (USF): The area exclusively occupied by your business, including private offices and storage.
Rentable Square Footage (RSF): USF plus a proportionate share of common areas like hallways, lobbies, and restrooms.
The difference between USF and RSF is determined by the common area factor or load factor. For example: A building has a load factor of 15%, meaning 15% of your USF is added to account for common areas.
Always verify whether the quoted square footage is USF or RSF, as it significantly affects your total rental rate.
Your comprehensive guide to understanding how much you'll pay for your next office space.
March 21, 2025 | by
Reviewed by real estate expert Jonathan Wasserstrum
Understanding the factors that influence commercial real estate price per square foot is crucial for businesses planning their office rent budgets. From calculation methods to lease structures, several elements play pivotal roles. Here’s a comprehensive guide to navigate these considerations effectively.
Calculating Your Rental Rate
Commercial real estate prices are typically quoted on an annual per-square-foot basis. To determine your monthly rental rate, use the following formula:
Annual Cost = Price per square foot × Total square footage
Monthly Cost = Annual Cost ÷ 12
Example:
If the rate is $50 per square foot for a 3,000-square-foot space:
$50 × 3,000 = $150,000 annually
$150,000 ÷ 12 = $12,500 per month
This calculation provides the base rent. Depending on the lease structure and whether the rate is based on usable or rentable square footage, additional costs may apply.
Usable vs. Rentable Square Footage
Understanding the distinction between Usable Square Footage (USF) and Rentable Square Footage (RSF) is essential when determining how much you’ll pay per square foot of office space:
Usable Square Footage (USF): The area exclusively occupied by your business, including private offices and storage.
Rentable Square Footage (RSF): USF plus a proportionate share of common areas like hallways, lobbies, and restrooms.
The difference between USF and RSF is determined by the common area factor or load factor. For example: A building has a load factor of 15%, meaning 15% of your USF is added to account for common areas.
Always verify whether the quoted square footage is USF or RSF, as it significantly affects your total rental rate.