Posted on April 7, 2012 by Nathan Smith
One of the most important factors to consider when determining which retail space you want to rent for your business is monthly cost, however how do you calculate that?
Calculating your monthly retail lease amount involves 3 things: 1. The size (in square feet) of the space you are about to lease (e.g. 1,500 SF) 2. The landlord’s asking base lease rate and estimated operating expenses (e.g. $25 SF+ $7 NNN SF) 3. The number 12 (number of months in one year)
Landlords of most retail properties typically require that their tenant’s pay both a base rental rate and their pro rata share of operating expenses (aka NNN or CAM). I will explain more about operating expenses, NNN, and CAM in another session.
Below are a couple of examples on how to calculate the monthly cost of renting retail space for lease.
Retail Example #1 Square footage of Retail Property = 1,500
SF Quoted Base Rental Rate = $25 SF/Yr Estimated operating expenses (NNN) = $7 SF/Yr Total asking lease rate = $32 SF/Yr Yearly Rent = 1,500 x $32 = $48,000 Monthly Rent = $48,000 / 12 = $4,000 per month
Retail Example #2 Square footage of Retail Property = 3,000 SF Quoted Base Rental Rate = $30 SF/Yr Estimated operating expenses (NNN) = $9 SF/Yr Total asking lease rate = $39 SF/Yr Yearly Rent = $117,000 Monthly Rent =$117,000 / 12 = $9,750 per month
Retail space is typically more expensive than traditional office space or other commercial rental property costs so it’s important that you know and understand how much your monthly rent will be before signing the contract. Any errors in your calculations can be costly to your business. For more information or help with estimating your your business rental space costs in Austin feel free to contact us. The small business development center also has a lot of good information.