Free tool
Commercial rent calculator
Asking rents in New York are quoted in dollars per square foot per year. Turn one into the monthly rent, then add the lease terms (yearly increases, free rent, a tenant improvement allowance) to see what you pay each year and the net effective rent.
Rent a month, first year
$29,167 a month
$350,000 a year, $70.00/SF a year, $5.83/SF a month
Net effective rent over 10 years
$72.75 /SF a year
$30,311 a month on average. Free rent and the TI allowance take 9.3% off the average face rent of $80.25.
| Base rent over the term | $4,012,358 |
|---|---|
| Less 6 months free | -$175,000 |
| You pay | $3,837,358 |
| Less the TI allowance | -$200,000 |
| Net cost of the space | $3,637,358 |
| Year | $/SF | A month | Paid |
|---|---|---|---|
| 1 6 mo free | $70.00 | $29,167 | $175,000 |
| 2 | $72.10 | $30,042 | $360,500 |
| 3 | $74.26 | $30,943 | $371,315 |
| 4 | $76.49 | $31,871 | $382,454 |
| 5 | $78.79 | $32,827 | $393,928 |
| 6 | $81.15 | $33,812 | $405,746 |
| 7 | $83.58 | $34,827 | $417,918 |
| 8 | $86.09 | $35,871 | $430,456 |
| 9 | $88.67 | $36,947 | $443,370 |
| 10 | $91.33 | $38,056 | $456,671 |
In Manhattan below 96th Street, $350,000 a year is over the $250,000 line for the Commercial Rent Tax: about $13,650 a year before any Small Business Tax Credit. Estimate it
Base rent only: electricity, tax and operating escalations and the Commercial Rent Tax come on top. Net effective rent here is straight-line (not discounted) and leaves out leasing commissions.
The starting numbers are an example deal to show how the math works, not market rents. Change them to match the space you are looking at.
How to calculate commercial rent
- Find the rate and its unit. A New York listing at "$70" means $70 per rentable square foot per year. A total a month or a rate per SF a month converts the same way: the calculator takes all four.
- Yearly rent. Rate per SF per year x rentable square feet. 5,000 SF at $70 = $350,000 a year.
- Monthly rent. Yearly rent / 12 = $29,167 a month.
- Increases. Raise the rate each lease year by the lease's increase: 3% a year takes $70 to $91.33 by year 10, and the base rent over the term to $4,012,358.
- Net effective rent. Take the free rent ($175,000 for 6 months) and the TI allowance ($200,000 at $40/SF) off the total, then divide by square feet and years: $3,637,358 / (5,000 SF x 10 years) = $72.75 per SF a year.
The calculator counts free rent inside the term (the first months of it) and figures net effective rent straight-line, with no discounting; a landlord's version may also discount future rent and subtract leasing commissions. It covers base rent only: electricity, tax and operating escalations and the Commercial Rent Tax are extra.
What a rent per square foot costs each month
Monthly base rent. Rows are the asking rent per SF a year; columns are the size of the space in rentable SF.
Questions
How do you calculate commercial rent?
Multiply the rent per square foot per year by the rentable square feet to get the yearly rent, then divide by 12 for the monthly rent. 5,000 SF at $70 per SF a year is $350,000 a year, or $29,167 a month.
Is commercial rent per square foot monthly or yearly?
In New York, and in most US office markets, asking rent is quoted per square foot per year. Some markets, notably in California, quote a monthly rate instead: $3.50 per SF a month is $42 per SF a year. Check the listing's unit before comparing two spaces.
How do I convert monthly rent to price per square foot?
Multiply the monthly rent by 12 and divide by the square feet. $25,000 a month for 4,000 SF is $300,000 a year, or $75.00 per SF a year.
What is net effective rent?
The average rent a tenant really pays once the landlord's concessions are taken out: total base rent over the term, less free rent and the tenant improvement allowance, divided by the square feet and the years. In the example above (5,000 SF at $70, 3% increases, 6 months free, $40/SF TI over 10 years) it is $72.75 per SF a year, 9.3% below the average face rent of $80.25. Landlords care about it because it is what the lease is worth to them; tenants use it to compare offers with different concessions.
How does free rent change the effective rent?
Free rent months are base rent you do not pay, so they lower the effective rent without lowering the rent written in the lease. On a 5-year lease of 4,000 SF at $60 per SF a year, 6 months free saves $120,000 and brings the effective rent from $60.00 to $54.00. Check whether free rent covers only base rent, or electricity and escalations too.
How do yearly rent increases work in a commercial lease?
Most commercial leases raise base rent over the term: a fixed percentage each year, a fixed amount per square foot each year, or step-ups every few years. At 3% a year, $70 per SF becomes $91.33 in year 10. Choose "% a year" or "$/SF a year" in the calculator to match your lease.
Does the asking rent include electricity and taxes?
It depends on the lease. Many Manhattan office leases are full service or modified gross: the base rent covers the building's base-year taxes and operating costs, electricity is billed on top, and you pay your share of tax and operating cost increases above a base year. Retail and outer-borough industrial leases are more often net, with taxes, insurance and common costs added to base rent. In Manhattan below 96th Street, leases at $250,000 a year or more can also owe the city's Commercial Rent Tax.
Is the rent charged on rentable or usable square feet?
In New York, rent is almost always charged on rentable square feet, which adds a share of lobbies, corridors and mechanical space to the space you actually use (usable square feet). The difference, the loss factor, varies by building, so two suites with the same rentable size and rent can hold different amounts of usable space.