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How to calculate the actual lease of commercial property
Why are some lease costs so high?
Commercial agents often list commercial property leases based on a 12 month calculation.
This is why when viewing commercial property for lease you may see prices that seem extremely high while others seem normal.
Before calculating your actual lease costs, read the listing and identify the term of the lease. You should be able to recognize whether the lease price is a year or per month basis.
If the lease amount is based on a yearly or annual basis, divided the amount by 12 to obtain the monthly lease amount. To further identify the cost of the lease you can then divide the monthly lease about by the square footage to achieve the price per square foot lease amount.
Example: A listing states a lease amount of $65,000 annually.
The monthly lease amount for this property would be - $65,000 / 12 = $5416.66 per month.
If the square footage of the space was 1000, the price per square foot would be $5416.66 / 1000 = $5.42 per square foot (rounded).
There are many more terms and conditions that must be addressed with calculating commercial leases.Â Please refer to the following article: Introduction to Leases for additional information, terms and calculations used for commercial leases.
Introduction to Leases - Part 1
This is a four part article focusing on Commercial leases.
Virtually every aspect of a lease is negotiable and is a potential concession. Whether representing the owner or the tenant, you will need to understand the negotiating point of view of all parties and the significance of each clause and/or concession..
A user (tenants) main objective might include:
- Obtaining a reasonable, fairly calculated rent
- Receiving maximum services for goods
- Predictable and fair operating costs
- Expandability of space for future needs
Introduction to Leases - Part 2
Lease Clauses that affect Cash Flows (Continued)
Fixed Rental is where contract rents are fixed for the duration of the lease.
With Step Leases, contract rents on long-term leases change by preset amounts or percentages on predetermined dates, such as each year or every five years. Although the lease payments vary over the term of the lease, all payments are determined and known at the beginning of the lease agreement. Therefore, unless the tenant defaults, all lease payments are known with certainty when the lease is signed.
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