Rental Rates for Commercial Property in the USA
The average commercial property price per square foot depends primarily on the type of the workspace you want to rent, but it is not the only factor that determines it. In this article, we will reveal the main questions regarding the issue of the commercial space rental in the USA, especially the theme of the rental fees.
Commercial lease is a contract that is signed between a landlord and a tenant where it is stated in what way and for how long a tenant may use a particular commercial space. The rental fee is one of the most important issues in this document as it defines the financial expenditures and regulations for both parts - the leaseholder and the tenant. Even though commercial leases are highly customizable and have varying terms, it is essential to understand how the average rent for office space or any other type of commercial property may change under various circumstances.
Rental Rates | Main figures
In order to decide how much rent to charge for commercial property, the landlord has to determine the market conditions at a particular period of time. The commercial lease contract should definitely include the information about the possible increases in the rental rates, the additional expenses, which may occur on top of rent, data about security deposits, as for the least. There are several types of commercial leasewhich can be used by landlords when they want to rent their properties out. Under each particular type, the tenant is expected to pay for particular amenities and services, but there are commercial leases where the landlord is also responsible for some payments (like, e.g., maintenance costs).
In the USA, the rent rates for commercial property vary mainly in accordance with the type of property, its location, and the real estate class.
The following table shows the basic data on the rent rates for commercial property across the country’s top business locations, according to the recently revealed data (the beginning of 2023).
So, how much does it cost to rent a commercial space in the country? In total, the average US office listing rate stays at about a bit more than $38 per sq.ft. per year, and this rate rises up 1.1% year-over-year. Retail averaged out to $18.09 / square foot, and industrial space came in at just under $8 / square foot.
Taking into consideration the aforementioned data, we may state that the rental fees for commercial premises vary significantly in accordance with the location these premises occupy, and their type. Therefore, tenants may find sophisticated office suites all across the country, but, depending on the choice of the location, they will pay different sum of money for rental.
What Affects Commercial Rental Prices
There are several factors that impact office space rental rates for small and large businesses. The majority of companies that invest in the office rental, want to increase their employees’ work efficiency and maximize their business growth. As a small business owner, you would better invest into the office space rental that will boost your productivity without making your business bankrupt. It is especially true when it comes to renting office suites in such credible areas as New York, San Francisco or Los Angeles, where the fees for office spaces are skyrocketing in some districts. At the same time, the US commercial real estate market features a vast number of office spaces that are ready to cover the needs of startups and SMEs, offering them top-quality workstations and individual suites at relatively reasonable prices. Here we are talking about the coworking premises and virtual offices.
Thus, the average square footage cost for commercial real estate in the country can be calculated differently. In the majority of cases, prices are really calculated on an annual basis. However, there are always exceptions to these rules, where the landlords change the fee, offering a short-term tenancy agreement. Monthly payments are common for those who operate from the coworking environments or book virtual office spaces. If you opt for the meeting room - daily and hourly tenancies are popular.
The type of workspace, its location and the duration of the lease are not the only factors that define the average commercial rental rates in the USA. They are mainly subdivided into economic, location, and property factors. Let’s go in for details.
Accessibility to transport
The transport system quality may influence the value of commercial property. That means that getting business space in an area with sufficient transportation networks will result in higher revenues. Also, in the majority of cases, commercial buildings within a well-connected hub are in high demand among renters. The area with an increased foot traffic are attractive to investors. This causes the prices of commercial properties in such locations to go upwards.
Population growth
A variety of factors like age distribution, education levels, migrations, contribute to population growth in a particular region. For instance, the demand for top-quality dining facilities and retail units may be high in an area that is facing growth in the number of job offers, and an influx of new inhabitants to the region. How much does it cost to lease retail space in the USA? Of course, the price will be higher in the areas with high pedestrian traffic, such as top tourist destinations, busy business quarters, areas with the extensive transport infrastructure, etc.
Potential for development
The opportunity of expanding a certain commercial property further can push the rental price for it upwards too. That is because the implementation for such a workspace in the future may be different from the initial use. For instance, the demand for mix-use commercial premises grows year by year, as there are businesses that require more than one type of business space to be efficient. As a result of changing tenants’ requirements, you may see many redevelopment projects that take place across the country. Some of them are aimed at providing the commercial and residential space in one and the same building. The more agile the workspace is - the more flexible the rental cost will be.
Additional amenities and services
The optional facilities may impact your workspace rental rate. As a rule, premises with extra facilities charge a higher fee for rental. Of course, you should receive high-speed Internet and workstations such as desks or tables without an extra charge. But there are other amenities that can make your rates become higher. For instance, you may pay a higher price for the possibility to use some facilities privately. If you need parking amenities, you could end up paying for permissions to park a vehicle on a monthly basis. Usually, serviced office spaces boast the basic services on-site, which include administrative, technical and janitorial support. Still, in addition to this, you may book catering or some other services that may be efficient for you. Generally, it also influences the rent rates for commercial property you have booked. In addition to optional amenities and services, you may encounter extra fees for water, gas and electricity. It will depend on the commercial lease type.
Wage growth and other economic indicators
The increase of wages results in the increase of income, and the purchasing power of people. Commercial premises in affluent areas are more expensive than those in the suburban parts of large cities or those available in smaller cities and towns. The market responds to tenants’ requirements, and the available offers relate to their incomes. The rental costs for commercial properties usually grow in accordance with the economic growth of the area where they are located.
The urgency to lease or rent the property
The speed with which the landlord wants to find a tenant will also dictate commercial rent prices. For instance, if it takes too long to lease the workspace, its owner may decide to lower the rental fee in order to find a tenant sooner. If there is no urgency to lease a particular commercial building, one may opt to wait until they find a match for their valuation.
It is possible to compile a long list of factors that may potentially influence the rental rates for commercial properties in the USA. Depending on the location of your future business residence, as well as your personal requirements to the workspace, you may be expected to pay a certain sum of money. It may change under some circumstances like the peculiarities of the economic development of the region, the expansion of the transport infrastructure, the growth of the potential tenant base and others. However, if you are aware of the basic trends of the commercial real estate market in the chosen location, you will definitely rent or lease the property at maximally favorable conditions.
Conclusions
Commercial rent prices are always fluctuating. Yet, if you conduct the research of the latest market trends, and circumstances that may influence the rental fee for a desired property, you will likely find the most favorable variant for your business. MatchOffice stays at the forefront of all the news that takes place in the commercial real estate industry. So, whether you want to rent or lease a property - you may contact us in order to get a top-quality brokerage assistance. We want each side of the rental process to be satisfied with the final result, especially when it comes to the financial expenditures. Helping our clients to lease and rent properties at favorable conditions is our main aim. At the end of the day, these are business people who make the world of CRE move and change, and we are those who can provide relevant pieces of advice for everyone who wants to benefit from these changes.
