How Much Does Commercial Real Estate Cost per square Foot?

BySheena Whitlock
How Much Does Commercial Real Estate Cost per square Foot?
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When shopping around for commercial real estate, one of the first things you need to consider is how much the property will cost per sq. foot. This information will help you determine whether or not the building meets your price range and can help give you an idea of whether or not it’s worth your time to look at the building further. Let’s learn how much does commercial real estate cost per square foot.

Here are some helpful tips on finding out how much commercial real estate costs per sq. foot so that you can make smart decisions about what buildings to check out in person.

The cost of commercial real estate is not easy to determine. It depends on what part of the country you’re in, how big the property is, and how much it’s being used. Suppose you’re interested in buying commercial real estate.

In that case, it’s important to know how much it will cost per sq foot so you can budget accordingly and ensure you have enough cash on hand before making any purchases or leases.

Here are some factors that go into determining the costs per sq. foot of commercial real estate, along with a few examples to help give you an idea of your expenses ahead of time.

Before finding out the commercial real estate cost per square foot, we have to know its type because the cost per square foot depends on what type your property is. 

Types of Commercial Real Estate

How Much Does Commercial Real Estate Cost per square Foot

The four main classes of commercial real estate include office space, industrial, Prime residential, and retail.

Now let’s explore each of their cost.

Type of PropertyCost (per square foot)
Retail Property$240
Industrial Property$6.53
Office Property$37.56
Prime residential costs$100 to $155

Average retail property costs $204 per square foot:

The Tampa/St. Petersburg area received the most recommendations to purchase retail property in the top retail real estate markets in the United States in 2022.

Tampa would be a favourite spot to buy retail property in 2022, as 46% of the market analysts claimed. But 63 percent of those polled suggested keeping the retail space in Dallas/Fort Worth and Orlando. Charleston received the largest recommendations from consumers (42%) to sell the retail property. 

Industrial property costs $6.53 per square foot:

In Los Angeles, where prices were already among the highest in the nation, prospective leases were negotiated at an average cost of $14.53 per square foot, which is $3.96 more than in-place rates of $10.57 per square foot. In reality, Los Angeles claimed the greatest rise, with 7.2 percent annual growth and the third-highest average industrial rent overall. 

Another coastal location where rents have been rising and lease margins expanding is the Inland Empire. The average cost of rent for an industrial zone in the Inland Empire increased 6.8% annualized, to $6.81 per square foot.

A $3.80 range per square foot resulted from new rates, which at the time-averaged $10.61 per square foot. Boston’s expansion, which was $1.78 per square foot in May, consequently had an 8.6 percent annual price increase.

Office space costs $37.56:

The average comprehensive equivalent listing cost in the leading 50 U.S. office markets was $37.56 in May, up 19 cents from the previous month but decreased 2.1 percent from the previous year. 

For the third straight month, Charlotte led the market in price rises. Charlotte followed up the 12.2 percent annual rise in inflation recorded in April with a 14.3 percent annual increase in May. Its average full-service analogous listing rate increased to $33.08 per square foot.

Prime residential costs:

Miami is predicted to have the most prime residential price growth in 2022, with premium prices likely to increase by 10% annually.

Demand has increased due to Florida’s low tax rates, Miami’s affordable housing, and the allure of seaside living throughout the downturn. According to Miller Samuel, Palm Beach County alone has witnessed 35 transactions over $30 million, 20 over $40 million, and two over $100 million since the pandemic began.

What determines commercial real estate costs per square foot?

Commercial real estate costs per sq foot will vary based on several factors, including location, property size, amenities, and more. To calculate commercial real estate costs per sq foot, you must first determine which factors are most important to your business.

By understanding these factors and how they affect prices in your area, you can better evaluate what price range you should expect for each property type. Many times local economic factors will have a larger impact on prices than a specific location or other considerations. Some things that might be considered are:

Ask yourself these questions before purchasing a property?

  • How will you finance your purchase?
  • How much will it cost per sq foot or for your entire property?
  • What kind of return on investment can you expect from commercial real estate?

You should ask yourself these questions before purchasing a commercial real estate property. Purchasing commercial property is a large investment that can be very rewarding. It’s important to know about commercial properties before investing in one.

If you do not understand what to look for when purchasing, then purchasing any commercial property is a bad decision. Below we have some tips on how to invest wisely in commercial properties.

Before purchasing any rental property, such as an apartment building or office space, you must do your research first.

What can you do to lower your commercial real estate costs per sq foot?

How Much Does Commercial Real Estate Cost per square Foot

Buying commercial real estate is often thought to be an expensive undertaking. After all, it requires a considerable amount of money to purchase property and buildings and pay for insurance, taxes, maintenance, and other common costs associated with owning real estate.

But there are several ways to keep your monthly costs lower than usual. This includes increasing your effective rent by renting spaces out when they aren’t being used (such as weekdays at night or weekends) or figuring out ways to downsize office space while keeping employees satisfied.

While these measures may seem like a challenge at first glance, in reality, they can make running a business cheaper. 

Here are some tips on how you can decrease your commercial real estate costs per sq. foot each month:

What should you avoid if you want to save money on your next commercial real estate purchase?

Looking for a deal is only one part of a successful commercial real estate acquisition. You also need to be able to afford any property you buy, which means understanding what your total costs are going to be. Find out which expenses you should expect on both sides of a commercial real estate transaction to get more than just a great price.

Knowing your potential costs will help prevent surprises down the road so that you can make an informed decision about whether or not it’s in your best interest to pursue a specific property purchase. 

Conclusion

Many factors come into play when determining commercial real estate prices. The bottom line is that commercial properties are priced based on their highest and best use, which might not always be profitable for a business owner.

However, understanding how commercial real estate is priced can help you better negotiate with sellers or investors and buy or lease your building at a fair price. If you’re considering leasing space in a retail strip mall, check out our guide to shopping center pricing.

When selling your property, we recommend talking to a local broker who can help you make smart decisions about your investment. Hope you have learned how much does commercial real estate cost per square foot. Good luck!

References:

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