So you’re planning to rent a commercial property, got a quote from your prospective landlord, and don’t know what the term $/SF year means? You’re not alone. At first glance, this term may seem confusing as it’s not used in residential leases. However, once you understand the terminology, you’ll learn how straightforward the terminology really is.
Meaning of $/SF Year in the Commercial Rental Industry
In the commercial leasing industry, $/SF/year or $/SF/yr means the rent per square foot per year. Why is this important? This is because most commercial rental rates are usually quoted in dollars per square foot on an annual basis. Let’s look at this through an example.
Let’s say you receive a quote of $20/SF/year for a 1,000 square foot space. This would be calculated as $20 x 1000 square feet = $20,000 total (this is the cost for the total year). Now, to get your monthly cost, divide by 12. So, $20,000 / 12 = $1,667 or get $1.67 per square foot per month. Ultimately, however you choose to calculate, your monthly base rent in this instance will be about $1,667 per month. Confirm exact rent with landlord as can be some rounding differences.
What Other Expenses Do You Incur as a Business Owner?
Giving you a $/sf/year quote is just the way the commercial industry works, which is why it is important for you to understand the term and what it means. But you must also realize that this is likely only the base rent you have to pay. In a commercial lease, you will also likely be responsible for additional expenses including –
- Utilities
- Common area maintenance
- Property and liability insurance
- Product insurance
- Marketing Costs of Landlord
- Installations and fit outs to suit your business needs
These expenses may vary from one year to another depending on the situation at the time. Insurance rates may go up in the case of a claim, or common area maintenance may go up if there is more snow removal required one year. It’s important that you also budget for these additional operating expenses to ensure you don’t overextend yourself.
So now you know what $/SF/year means and understand the basics. The $/SF year base rent is calculated on the value of the area and size of properties within it. If the property has a higher value, the base rent quoted will be higher.
Understanding how $/SF year base rent works is an excellent first step towards securing a commercial rental property. Never hesitate to ask for more details, and be sure you understand everything.
