Today, we will check the commercial rent calculator. This handy tool is designed specifically for tenants, particularly ones who lease commercial spaces like retail spaces or offices. Even though the price (yearly or monthly) per square foot is quoted by landlords, many renters find it confusing. This is where the commercial lease calculator comes in!
There are a variety of terms in lease agreements, including area maintenance, maintenance expenses, cash flow, gross leases, property taxes, cap rate, and so on. If you want to go through this process without a real estate agent, then this terminology can easily make you feel overwhelmed. That’s why you should use our calculator.
Whether you rent a warehouse, restaurant, building, office, or retail space, it can help you calculate your rent per year (annual rent) and get a better idea of monthly rent payments. In addition to allowing you to reveal the total monthly rent payments, our calculator will also help you determine the rental commission that your agent receives (agent’s fee). You can use it for triple, double, and single net leases.
Commercial Lease: How Does It Work?
A commercial lease is a legal agreement between the tenant and the landlord, which sets out the rights and obligations of both parties. It can also be a contract between a business owner and a property owner. This contract defines the terms of the tenancy, such as the duration of the lease, rent, as well as other conditions and charges.
Commercial leases are typically used for office space or retail stores. However, they can also be used for other non-residential spaces like warehouses, manufacturing plants, restaurants, and hotels. Commercial rents are usually for a fixed term of years and can be renewed by mutual agreement. So, let’s see how it works.
The property owner agrees to lease their property or space to the business owner or tenant for use as an office or retail space for a certain amount of time, in exchange for payment each month. The tenant pays rent to the landlord on a monthly basis in advance.
The landlord is usually in charge of maintaining and repairing any property damage done by the tenant. On the other hand, tenants are responsible for paying rent on time and keeping the property clean. It is also important to note that a commercial lease is not transferable without consent from both parties.
There are 3 main types of commercial leases:
- Single net lease – The majority of the risks are assumed by the landlord. As a tenant, you will have to pay the rent, which includes property taxes. However, your landlord will be responsible for the maintenance, repairs, as well as insurance premiums. Because of that, the rent is higher compared to other types of leases.
- Double net lease – The tenant takes over the risks of insurance premiums and property taxes. On the other hand, the landlord is supposed to cover maintenance costs and repairs, especially the substantial ones.
- Triple net lease (NNN lease) – In this case, the tenants are responsible for almost all the risks. This includes everything from repairs and maintenance to insurance premiums and property taxes. That is why the rent is quite low. On the downside, they can occasionally face unexpected expenses like fixing a leaky roof.
Commercial Rent Formula: How to Calculate It?
When calculating your annual rent, use this simple formula:
Rent = Area * Rate
- Area – the total space you rent in ft² or m²
- Rate – the rent you pay per ft² or m² (your landlord determines the rate)
For example, if you lease an office of 200 square feet and your rate is $1,000/ft², then the rent per year would be $200,000.
Rental Agent’s Fee: How to Calculate the Rental Commission?
The fee for a rental agent is usually a percentage of the monthly rent. This is to cover the administrative costs of the rental agent and their team.
A rental agent’s fee can be as high as 15% of the monthly rent when they are not charging for their services on a per-hour basis. The percentage changes depending on how much work is required to find, lease and manage your property.
Fee = percentage * duration * rent
- Fee – the cost of the rental agent
- Percentage – the annual rent expressed as a percentage
- Duration – the lease period
We will take an example to help you get a better understanding of how it works.
Let’s say the percentage of the annual rent is 6.00% and you want to lease a commercial space for 1 year (duration of the lease). In this case, the agent’s fee would be $12,000.
FAQs
What Are the Most Common Types of Commercial Leases?
Commercial leases can be categorized in different ways. They can be classified by the type of property, such as retail, office, or warehouse. They can also be classified by the length of the lease, such as short-term or long-term.
The most common types of commercial leases are:
- Retail Lease
- Office Lease
- Warehouse Lease
A NNN Lease (Triple Net Lease) is the most popular kind of lease when it comes to commercial buildings. There are no operating expenses in the rent. This means tenants don’t pay expenses like property management, insurance, maintenance, utilities, and property taxes.
How Commercial Leasehold Works
As far as commercial leasehold is concerned, commercial real estate is owned by the tenant and leased to the property owner. The tenant has full rights over the property and can use it for any purpose they see fit.
When purchasing a leasehold, you’ll actually be the owner of the fittings, fixtures, or business for a set period of time. This means every business premise will be occupied for an agreed lease. Right after taking over the business, the cost price (value) of the stock should be paid for.
However, commercial leaseholds are not always beneficial to both parties involved in the transaction. It is an investment that needs to be carefully considered before deciding on whether or not to opt for it.