How are commercial properties' operating expenses typically calculated?

Commercial properties' operating expenses are typically calculated on a Cost per square foot ($/SF) basis. This method provides a standardized way to assess and compare the overall operating expenses associated with different properties, regardless of their size or use. By expressing expenses per square foot, property managers and owners can gain insights into the efficiency of their expenditures relative to the space they are managing.

For instance, if a commercial property incurs significant costs for maintenance, utilities, or property management, calculating these expenses per square foot allows stakeholders to evaluate whether these costs are reasonable for the area or type of building. It also helps in budgeting and forecasting future expenses, as well as in setting rental rates that align with overall costs.

This approach is particularly useful in commercial real estate, where understanding the cost structure is critical for making informed investment decisions and maintaining profitability.