What is the usual rent formula for commercial property.

Jilly Andre asks:
(updated on Monday, April 28th 2008)

What is the usual rent formula, please, for commercial property.

Our Experts Answer:

Empower Education expert Peter Aranyi replies:
Commercial rents are set by the market -- i.e. Landlords/tenants do their own research, ask around from agents etc but often a valuer advises what the market rent for that type of space in that location is likely to be based on comparative rents -- what's being achieved by other landlords.

The rent and terms are a matter of negotiation. So for instance (taking Wellington as an example) a retail space in prime Lambton Quay will rent for $x per sq metre but a similar quality space in Kilbirnie or Newtown will typically rent for a fraction of that -- reflecting the demand of the location and exposure to foot traffic. It's the same with office and industrial -- rent levels are determined by the quality of location and demand for that type of space in that location.

Each sector has specific elements that are important to tenants -- for which they'll pay higher rents.


 

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