Some commonly used terms and formulas related to analyzing retail lease costs include Base Rent, Rate, Total Effective Rate, Average Annual Effective Rent, and Average Annual Effective Rate.
The Base Rent is simply the contract dollar amount of periodic rent. The base rent is often the amount on which future escalations are calculated.
The Base Rate is the Base Rent expressed as a dollar amount psf. Base Rent divided premises square footage = Base rate.
The Total Effective Rate is the total effective rent over the entire lease term divided by the square footage of the leased premises. Total effective rent / premises square footage = total effective rate.
The Average Annual Effective Rent is the total effective rent over the entire term of the lease divided by the number of years in the lease term. Total effective rent/lease term(years) = average annual effective rent
The Average Annual Effective Rate is the average annual effective rent divided by the square footage of the leased premises. Average annual effective rent/premises square footage = average annual effective rate.
To calculate the total retail cost of occupancy it is necessary to include cost, concessions, and allowances separately because they mau occur at different times during the life of the lease. The anlaysis must,therefore, be adapted for the circumstance of each lease as described in this document.
+ Percentage rent
+Real Estate Taxes
+Existing lease buyout
-Real Estate Tax Stop
-Operating Expense Stop
-Moving expense allowance
-existing lease buyout allowance
= Effective rent paid by user
The total cost of occupancy is the sum of all actual out of pocket costs to the tenant necessary to take occupancy of the space. It is the total effective rent plus or minus additional costs or allowances that are not attributable to the lease such as internet hook up or ordering new stationary.