Commercial Lease Calculator
True lease cost with escalations, per foot and per month.
Total lease obligation
Estimates for planning only, not financial advice.
A commercial lease\'s true cost is the total obligation over the term, not the quoted rate per square foot. At $28 per foot on 5,000 rentable feet, year-one rent is $140,000. With 3% annual escalations over 5 years, the total is $743,279, an effective $29.73 per foot per year. Add triple-net pass-throughs, subtract free rent and tenant improvement allowances, and you get the effective rent: the only number that compares fairly across offers. This calculator builds all of it.
How to Use This Calculator
Enter rentable square feet (including your share of common areas) and the quoted base rent per square foot per year. Set the lease term and annual escalation percentage. If it is a triple-net lease, add the estimated pass-throughs per foot; for gross leases leave it at zero. Enter free-rent months and the total TI allowance as concessions. The results show year-one rent, total obligation, effective monthly cost, and effective rent per foot.
Enter rentable feet and base rate. Confirm rentable vs usable with the load factor.
Set term, escalation, and NNN pass-throughs. Convert every concession to dollars.
Compare effective rent per foot across offers. Then weigh the non-price terms: guarantee, flexibility, expansion rights.
The Lease Math
Escalations compound quietly: 3% a year over 5 years adds 6% to the naive 5x multiple, and over 10 years it adds 15%. Free rent is worth the monthly rate of the months abated, usually at the start when rent is cheapest, which slightly understates its value in escalated leases. The TI allowance is landlord money toward your build-out; subtracting it from the obligation shows what the space truly costs you versus a vanilla alternative.
Worked Example
A 5,000-foot office at $28 per foot: year-one rent is $140,000. With 3% annual escalations, the five years run $140,000, $144,200, $148,526, $152,982, and $157,571, totaling $743,279. Monthly average: $12,388. The landlord offers 2 months free ($23,333 of value at year-one rates) and a $75,000 TI allowance. Net obligation: $743,279 - $23,333 - $75,000 = $644,946. Effective rent: $644,946 / 5,000 / 5 = $25.80 per foot per year, meaningfully below the $28 quote. A competing $26 gross quote with no concessions is $26.00 effective: the "expensive" $28 offer wins.
Lease Types Compared
| Lease type | You pay | Risk sits with |
|---|---|---|
| Gross / full service | One rent number, all-in | Landlord (cost inflation) |
| Triple net (NNN) | Base rent + taxes + insurance + CAM | Tenant (cost inflation) |
| Modified gross | Base rent + some pass-throughs | Shared |
| Percentage lease (retail) | Base rent + % of sales | Shared, tied to performance |
Always compare all-in: a $20 NNN rate with $12 of pass-throughs is a $32 lease wearing a $20 disguise. Get the pass-through history for 3 years, because CAM charges creep and there is little you can do mid-term. Cap controllable expenses in the lease if you can, audit CAM statements annually, and never sign a personal guarantee without negotiating a cap or burn-off. For the decision math around the space, our rent vs buy calculator compares leasing against purchasing, our business budget planner absorbs the rent into the plan, and our contribution margin calculator shows the sales volume the rent demands.
Estimates for planning only, not financial advice.
Frequently Asked Questions
How is commercial rent calculated?
Most commercial rent is quoted per square foot per year: $28 per square foot on 5,000 square feet is $140,000 a year, or $11,666.67 a month. Multiply the rate by the rentable square footage, not the usable square footage, because common areas are allocated via the load factor. Always confirm whether the quote is for rentable or usable feet before comparing.
What is the difference between gross and triple net (NNN) leases?
In a gross (full-service) lease, the quoted rent covers everything: taxes, insurance, and maintenance. In a triple net lease, you pay base rent plus your share of property taxes, insurance, and common-area maintenance, which can add $8 to $15 per square foot. A $20 NNN rate with $12 of pass-throughs costs $32 all-in, more than a $28 gross rate. Compare all-in costs, never base rates across lease types.
What are typical commercial lease escalations?
Annual increases of 2% to 4% are standard, either fixed or tied to CPI. On a 5-year lease at $140,000 starting rent with 3% annual escalations, total rent is about $743,279, not $700,000. Negotiate the escalation base: fixed bumps are predictable, CPI-linked can surprise in inflationary years. This calculator models fixed annual escalations across the full term.
What is a load factor in commercial leasing?
The load factor is the share of common areas (lobbies, hallways, restrooms) added to your usable space to get rentable square footage. A 15% load factor turns 4,350 usable feet into 5,000 rentable feet, and you pay rent on the 5,000. Lower load factors mean more of your rent buys space you actually occupy. Always ask for both numbers.
How long should a commercial lease be?
Three to five years is typical for office and retail; industrial often runs five to ten. Longer terms usually win lower rates and bigger tenant improvement allowances but reduce flexibility. Match the term to your planning horizon: a startup with uncertain headcount should favor shorter terms with renewal options over a cheap 10-year lock-in it may outgrow or abandon.
What is a tenant improvement (TI) allowance?
Money the landlord contributes toward customizing the space, quoted per square foot: $20 to $60+ for office depending on market and term. A $30 TI allowance on 5,000 feet is $150,000 of build-out you do not fund. Amortize it mentally over the lease term: $150,000 over 5 years is effectively $2.50 per square foot per year of value, which can flip a close comparison.
What are free rent periods worth?
Months of abated rent at lease start, typically 1 month per lease year in soft markets. Three months free on a $140,000 annual rent is $35,000 of value, or $7,000 a year over a 5-year term. Convert every concession (free rent, TI, moving allowances) to a per-square-foot-per-year figure and subtract from the quoted rate to get the effective rent: the only number that compares fairly.
Should I use a tenant rep broker?
Yes, and it costs you nothing directly: the landlord pays the broker's commission from the deal economics. A good tenant rep knows actual transacted rents (not asking rents), which concessions are achievable, and which landlords are difficult. They typically save multiples of their commission in rate and terms. Never go direct to the listing broker, who represents the landlord.
What is a personal guarantee and can I avoid it?
A personal guarantee makes you personally liable for the lease if the business defaults. Landlords demand them from small businesses; larger or established tenants can often negotiate a cap (e.g., 12 months of rent) or a burn-off after on-time payments. It is the most important non-price term in the lease: everything else is negotiable arithmetic, this is personal risk.
How do I compare two lease offers?
Reduce each to effective rent per square foot per year: (total base rent + pass-throughs - free rent value - TI allowance) / rentable feet / years. Then compare the non-price terms: term flexibility, expansion rights, termination options, and guarantee exposure. The lowest effective rent with a brutal guarantee can be worse than a slightly higher rent with an exit ramp.