Reading a Per-Square-Foot Quote Properly

Per square foot rent quotes are the standard shorthand in commercial real estate, but the number by itself misses critical context. A $20 per foot quote could mean radically different total occupancy costs depending on lease type, annual escalations, included services, and how the square footage got measured. Rochester tenants comparing commercial space need to unpack the per foot number to compare quotes meaningfully.

What the number represents. Annual rent divided by rentable square footage gives per foot rate. A tenant paying $1,800 monthly, or $21,600 annually, on 1,200 rentable square feet pays $18 per foot. Simple math, but each element in the calculation can vary. What counts as rent varies. What counts as rentable square footage varies. The per foot rate hides these variations.

The lease type variable. NNN quotes exclude pass through charges from the per foot number. A $13 per foot NNN quote with $7 per foot in estimated pass throughs produces $20 per foot gross equivalent. Modified gross quotes include some pass throughs but not others. Full service gross quotes include everything. Comparing NNN against gross without gross up produces misleading conclusions.

The square footage measurement variable. Rentable square footage typically includes tenant space plus a share of common areas allocated to the tenant. Usable square footage covers only the tenant space itself. Different landlords use different measurement standards. BOMA standards define rentable and usable, but implementation varies. The same physical space might be measured at 1,200 or 1,350 rentable square feet by different landlords, changing the per foot rate calculation.

The escalation variable. Base rent escalations over the lease term significantly affect average occupancy cost. A $18 starting rate with 3 percent annual escalations averages $20.39 over a 10 year term. A $18 starting rate with 4 percent annual escalations averages $21.62. The difference in average rate produces meaningful total cost differences over long leases.

The free rent variable. Landlords often offer free rent periods at lease commencement to attract tenants. Two months free on a 5 year lease saves the tenant 3.3 percent of total rent. Six months free on a 5 year lease saves 10 percent of total rent. Effective rent after free rent adjustments differs meaningfully from headline rate.

The TI allowance variable. Landlord funded tenant improvement allowances reduce the effective rent by financing tenant buildout the tenant would otherwise pay directly. A $25 per foot TI allowance on a 5 year lease at market interest rates saves the tenant roughly $5 to $6 per foot in effective rent. Higher TI at higher rate can produce similar effective cost to lower TI at lower rate, but the cash flow timing differs.

The utility inclusion variable. Some gross leases include all utilities. Some exclude tenant metered utilities. Some NNN leases include common area utilities in CAM but not tenant utilities. Utilities on office space typically run $2 to $4 per foot annually. Whether these fall inside or outside the quoted rate affects total occupancy cost comparisons.

The parking variable. Some rates include parking. Some charge parking separately at $50 to $150 monthly per space. Suburban Rochester area buildings typically include parking in rent. Effective per foot rate should account for parking cost on properties where parking is separately charged.

The full comparison framework. Convert every quote to the same lease type basis. Add pass throughs to NNN quotes. Include tenant utilities. Include parking costs. Adjust for escalations to produce average rate over the expected lease term. Adjust for free rent and TI allowances. The comparable number is total occupancy cost per foot per year, averaged over the lease term, not the headline quote.

The Rochester area context. Rents vary significantly by submarket and property class. Rochester Hills and Troy office at $18 to $28 per foot NNN or $25 to $35 gross equivalent. Older suburban office at $14 to $22 per foot NNN. Industrial across the market at $6 to $12 per foot NNN. Retail across a wide range from $10 to $35 per foot NNN depending on location and property type.

TDG Commercial, known as best commercial real estate agents in Rochester, converts per foot quotes to full occupancy cost comparisons for tenant representations across the region.