how much is it to rent a building for a small business

Cost to Rent a Building for Small Business

Are you a small business owner looking to rent a building? It’s important to understand the costs involved in renting commercial property. Factors such as location, size, and condition can influence the rental cost for a small business.

When considering the rental price for a building, you should take into account additional charges such as common area maintenance, property taxes, and insurance premiums. These expenses can vary depending on the property and its location.

The average cost of renting business space per square foot can vary across different metro areas. Prices range from the low $20s to the $70s. It’s essential to assess your business’s revenue, square footage, and industry benchmarks to determine an appropriate percentage of income that should be allotted for rent.

Factors Affecting Commercial Rent Prices

When it comes to renting a commercial building for your small business, there are several factors that can influence the cost. These factors include the location of the property, the size of the property, the condition of the building, and its features.

The location of the property plays a significant role in determining the rental price. Properties located in high-density areas or near busy roadways often demand higher rents due to increased foot traffic and visibility. On the other hand, properties in remote or less desirable locations may have lower rental costs.

The size of the property also affects the rental price. Generally, larger spaces command higher rents compared to smaller spaces. This is because larger spaces offer more potential for businesses to utilize and expand their operations.

Another factor to consider is the condition of the building. Brand new buildings or recently renovated properties may come at a higher price due to their improved aesthetics and modern features. Older buildings, on the other hand, may have lower rental costs but may require additional maintenance in the long run.

The features of a building can also influence the monthly rent amount. Features such as office layouts, storage space, and on-site parking can add value to a property and therefore increase its rental price. For example, a building with flexible office spaces or ample parking spaces may command a higher rent compared to a building without these features.

To summarize, the factors affecting commercial rent prices include the location of the property, the size of the property, the condition of the building, and its features. It is important to consider these factors when searching for a space to rent for your small business as they can significantly impact your overall rental costs.

Average Rent Estimates for Different Types of Businesses

When it comes to renting a space for your small business, it’s crucial to have a clear understanding of the average rent expectations for different types of businesses. These estimates can help you determine if you’re allocating an appropriate percentage of your revenue towards rent, known as the rent-to-revenue ratio. Additionally, it’s essential to consider industry benchmarks to ensure you’re making informed decisions about your rental costs.


Restaurants should aim to keep their total occupancy costs, including rent and additional fees, between 6-10% of gross sales. This percentage allows for a healthy balance between expenses and revenue, ensuring that your business remains profitable. By keeping your occupancy costs within this range, you can effectively manage your budget and allocate resources towards other vital aspects of your restaurant’s operations.

Hair Salon

For hair salons, it’s typical to spend between 3-10% of your revenue on combined rent and property taxes. This range takes into account the varying size and location of hair salons, as well as their revenue potential. By adhering to this range, you can ensure that your salon’s rental costs remain manageable while still allowing for profitability and growth.

Law Firm

Law firms allocate an average of 6-7% of their gross revenue to rent. However, this percentage can increase to 15% for prestigious locations that offer valuable visibility and prestige. It’s essential to balance the potential benefits of a prime location with the impact it may have on your bottom line. By considering both industry benchmarks and your firm’s revenue, you can make an informed decision about the amount you’re willing to allocate towards rent.


Retailers should aim to spend no more than 5-10% of their gross annual sales on rent. This percentage allows for flexibility in managing other operational expenses while still maintaining a profitable business. By staying within this range, you can ensure that your rent costs are sustainable and that you have the financial resources to invest in inventory, marketing, and other essential aspects of your retail business.

Auto Shop

Auto shops typically allot 12-13% of their annual gross revenue for rent. This percentage takes into account the specialized nature of the industry and the potential for higher overhead costs. By budgeting within this range, you can ensure that your auto shop remains financially stable and has the necessary funds to invest in equipment, employee salaries, and ongoing maintenance.

Please note that these percentages are rough estimates and can vary depending on the specific circumstances of your business. It’s crucial to consider your industry benchmarks, revenue projections, and the overall financial health of your business when determining an appropriate amount to allocate towards rent.

Next, we’ll explore how to calculate the rent-to-revenue ratio, which can provide further insights into your rental costs and help you make informed decisions about renting a building for your small business.

Calculating Rent-to-Revenue Ratio

To determine the rent-to-revenue ratio for your small business, you need to consider two key factors: sales per square foot and monthly rent calculation.

First, calculate the sales per square foot by dividing your average monthly gross sales by the square footage of your rented space. This will give you an understanding of the revenue generated within a given area.

Next, calculate the monthly rent by multiplying the rent per square foot by the total square footage and dividing the result by 12. This will give you an estimate of the monthly rent for your business location.

Once you have both the sales per square foot and the monthly rent, you can use this information to calculate the rent-to-revenue ratio. Simply divide the monthly rent by the average monthly gross sales to get the ratio.

Comparing your rent-to-revenue ratio with industry benchmarks can help you determine if the proposed rent is reasonable based on your business’s revenue. Be sure to consider the percentage of income that should ideally be allocated for rent in your industry and adjust the square footage and rent cost accordingly.

Example Calculation:

Average Monthly Gross Sales Square Footage of Rented Space Rent per Square Foot Monthly Rent Rent-to-Revenue Ratio
$50,000 1,000 sq ft $25 $2,083.33 4.17%

In the above example, with average monthly gross sales of $50,000 and a rented space of 1,000 square feet at a rate of $25 per square foot, the monthly rent would be $2,083.33. The resulting rent-to-revenue ratio is 4.17%. This ratio can be compared to industry benchmarks to determine if it falls within an acceptable range for your business.

Lease Types and Additional Costs

When it comes to leasing a building for your small business, understanding the different types of leases and additional costs involved is crucial. These factors can have a significant impact on your overall leasing expenses and should be carefully considered before making a decision.

Lease Types

There are three main types of leases you may encounter:

  1. Triple Net Lease (NNN): In this type of lease, the tenant is responsible for covering additional property costs such as insurance, property taxes, and maintenance. It offers flexibility but can result in higher expenses for the tenant.
  2. Full-Service Lease: With a full-service lease, all property expenses are covered by the landlord. This can provide convenience and predictable monthly costs for the tenant.
  3. Gross Lease: A gross lease incorporates a flat rate that includes all property expenses. This type of lease simplifies the payment process, as the tenant only needs to pay the agreed-upon amount without additional charges.

Each lease type has its pros and cons, and the right choice depends on your business’s specific needs and budget.

Additional Costs of Leasing

Aside from the lease type, there are additional costs that should be taken into account when leasing a building for your small business:

  • Utilities: Depending on the lease agreement, tenants may be responsible for paying utilities such as water, electricity, and gas.
  • Maintenance: Some leases may require tenants to cover maintenance costs, including repairs and regular upkeep of the rented space.
  • Property Insurance: While some leases include property insurance in the rental cost, others may require tenants to obtain their own insurance coverage.
  • Rent Increases: Leases typically outline whether and how rent can be increased over time. It’s important to understand how rent increases are calculated and factor them into your budget.

By carefully considering these additional costs, you can better estimate the overall expenses of leasing a building for your small business.

Comparing Lease Types and Additional Costs

Lease Type Responsibility for Additional Costs
Triple Net Lease (NNN) Tenant covers property expenses such as insurance, property taxes, and maintenance
Full-Service Lease Landlord covers all property expenses
Gross Lease Flat rate includes all property expenses

In conclusion, understanding the different lease types and additional costs associated with leasing a building is crucial for small business owners. By examining your business’s needs and budget, you can make an informed decision on the most suitable lease type and budget for additional expenses, ensuring that your leasing agreement aligns with your financial goals.

Alternative Rental Options

In recent years, more small businesses have been exploring alternative rental options to save costs. These options provide flexibility and affordable solutions for entrepreneurs looking to establish their businesses without the burden of high rental expenses.

Shared Spaces and Co-working Spaces

Shared spaces and co-working spaces have gained popularity among startups and small businesses. These spaces offer affordable rental rates, allowing entrepreneurs to access fully equipped offices and shared facilities at a fraction of the cost of traditional office spaces. Shared spaces foster collaboration and networking opportunities, creating an environment conducive to innovation and growth.

Seasonal Retail Operations

For businesses with seasonal operations, renting space on a short-term basis is a viable option. Farmers markets, pop-up stores, and kiosks in high-traffic locations provide temporary rental opportunities for businesses looking to capitalize on seasonal demand. This allows retailers to minimize costs by only renting space during peak periods, maximizing profits while reducing long-term commitments.

Startup Incubator Spaces

Startup incubator spaces are specially designed to support early-stage businesses. These spaces often provide office facilities, mentorship programs, and access to resources and networks that can help startups succeed. Many incubator programs offer free or subsidized rent, making them an attractive option for entrepreneurs looking to launch their businesses while minimizing initial expenses.

When considering these alternative rental options, it is crucial for small businesses to assess their specific needs and budget. Conducting thorough research and evaluating the advantages and disadvantages of each option will help entrepreneurs make informed decisions that align with their goals and financial capabilities.

Having a visually appealing and relevant image is crucial, especially when discussing alternative rental options. The image above showcases a shared workspace, emphasizing the collaborative environment and modern amenities that make it an attractive option for small businesses and startups.


When it comes to renting a building for your small business, there are several factors to consider in order to make an informed decision. The location of the property plays a crucial role in determining rental costs, with high-traffic areas and proximity to busy roadways commanding higher rents. Additionally, factors such as the size and condition of the building, as well as additional costs like common area maintenance and utilities, can significantly impact rental prices.

To ensure affordability, it is recommended to calculate the rent-to-revenue ratio and compare it to industry benchmarks. This will help you determine the appropriate percentage of your income that should be allocated for rent. By carefully assessing all these factors and conducting thorough research, you can make informed decisions that align with your budget and business goals.

Furthermore, exploring alternative rental options can provide cost-saving solutions for small businesses. Shared spaces, co-working spaces, and seasonal retail operations offer affordability and flexibility. Startup incubator spaces, which often come at no cost, provide resources and support during the initial stages. These alternatives should be considered based on your specific needs and budget.

In conclusion, renting a building for your small business requires careful consideration of location, size, condition, additional costs, and alternative rental options. By taking all these factors into account and conducting thorough research, you can find a space that not only fits your budget but also supports the growth and success of your business.

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