Commercial Lease Calculator

How Commercial Lease Costs Are Calculated

Commercial leases are priced per square foot per year (annual) or per month, depending on the lease type. There are three main structures, each shifting different costs to the tenant.

Lease types:

• Gross lease: Tenant pays one flat rent; landlord covers property taxes, insurance, and maintenance
• Net lease (NNN): Tenant pays base rent plus their share of taxes, insurance, and CAM (Common Area Maintenance)
• Modified gross: A hybrid. Tenant pays base rent plus some expenses, negotiated individually

NNN lease monthly cost formula:

Monthly Cost = (Base Rent per SF × SF ÷ 12) + (NNN Expenses per SF × SF ÷ 12)

Worked example:

• Space: 2,500 sq ft
• Base rent: $18/SF/year
• NNN expenses: $6/SF/year

Base rent monthly = ($18 × 2,500) ÷ 12 = $3,750/month NNN monthly = ($6 × 2,500) ÷ 12 = $1,250/month Total monthly = $5,000

CAM charges (Common Area Maintenance) typically cover:

• Parking lot upkeep, landscaping, security lighting
• Lobby and hallway cleaning
• An administrative fee layered on top of the CAM costs themselves, commonly 10–15% of those costs

Rent escalation clauses:

Most commercial leases include annual rent increases:

Year N rent = Base rent × (1 + escalation rate)^(N − 1)

The exponent is N − 1, not N, because year 1 is the base rent. Getting this wrong overstates your last-year figure by one full escalation. At 3% annual escalation, a $3,750/month base rent is $4,221/month in year 5, and it reaches $4,347 only in year 6.

What this calculator escalates, and what it does not. The escalation applies to base rent only. NNN and operating costs are held flat, which is how the lease itself is written: those are pass-throughs reconciled against the landlord’s actual spend each year, not a fixed percentage you agree to in advance. In practice they drift up too, often faster than base rent, so treat the NNN column as today’s estimate rather than a projection.

Key negotiation points:

• Tenant improvement allowance (TIA): Landlord contribution to fit-out costs, typically $20–$80/SF
• Free rent period: 1–6 months common for new tenants signing 5+ year leases
• Exclusivity clause: Prevents landlord from leasing adjacent space to your direct competitors