Commercial Property Rents Are Customarily Expressed Annually

Let's suppose you are a commercial construction lender underwriting a commercial mortgage loan on a proposed office building.  One of the first items you will look at when analyzing the feasibility of the project are the projected rents.  You will find the projected rents on the pro forma operating statement.  A pro forma operating statement is a hypothetical income and expense statement based on certain assumptions, like being able to lease the property at a certain lease rate.

When discussing the rent on an income property, like a shopping center or office building, it is customary to express the rent as a certain dollar figure per square foot (per year).  The custom is not to actually say "per year".

So if a 10,000 square foot unit in a class A office tower was leasing for $350,000 per year in downtown San Francisco, the custom in the commercial real estate industry is to say, "The rent is $35 per square foot."

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