How to Calculate Office Space Rent

by Madison Garcia; Updated September 26, 2017
Three businessmen standing in elevator lobby

Understanding and calculating average office space rent is critical in accurately reporting rent expense for accounting purposes. Calculating office rent per usable square foot can help businesses understand the value of the rent payment in comparison with other rental properties. Variations on the office rent per square foot formula can also be used to allocate shared overhead costs by department.

Average Monthly Office Rent

Calculate your average monthly office rent expense. To do this, sum all rent, fees and miscellaneous lease expenses charged by your landlord and divide the number by the number of months in the lease. This method allows you to "smooth" the expenses over periods of rent abatement or months when you may pay double rent. For example, say that you sign a one-year rental lease in which the first two months are free, and then rent is $2,000 the first month and $1,000 for the remaining nine months. Total rental expense is $2,000 plus $9,000, or $11,000. Average monthly office rent is $11,000 divided by 12 months, or $917.

Useable Square Footage

Calculate the amount of usable square footage in your office rental. Usable square footage is different than the rental square footage listed on your lease agreements and documentation, because some of the square footage may be shared with other companies or not usable at all. To calculate this figure, subtract out all common spaces shared with other companies or unusable space -- such as hallways, building reception areas, landscaping, shrubbery, janitor closets and telephone rooms -- from your total square footage. If you have a small office, you can simply use a measuring tape to measure usable square footage.

Office Rent Per Usable Square Foot

Divide average monthly rent by usable square footage to determine usable office space per square foot. For example, if your monthly rent is $917 and the office has 600 square feet of usable space, you're paying $1.53 per square foot. Compare this rate to the rate at previous offices or potential sites to measure how much value you're getting out of your monthly rent payment.

Other Variations

You can use variations on this formula to allocate shared costs to certain departments based on square footage. For example, rent expense and utility expense are best allocated based on how much space each department uses. To calculate the overhead application rate, divide the department square footage by the square footage of all departments. For example, say that your sales department takes up 300 square feet and all departments combined take up 1,000 square feet. The overhead application rate for the sales department is 30 percent, which means that department should absorb 30 percent of rent and utilities costs.

About the Author

Based in San Diego, Calif., Madison Garcia is a writer specializing in business topics. Garcia received her Master of Science in accountancy from San Diego State University.

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