Price Per Sq Foot - Rental

Just refreshing to top to see if any thoughts.

Price per square foot for rentals is a valid metric, but is seen much more (and is ultimately more relevant) in commercial properties than in residential ones. Not that many of the market reports for rentals include this information either. A good reason for this is because of the disutility of space over a certain size and the simple fact that larger spaces don't always command a premium in the rental market where the cost is given in the monthly rent.

As an example say you had a rental building with a 1,200 square foot 2-bedroom line and a different line that were smaller at say 1,000 square feet. If you apply a market rent of $40psf (annualized) to the 1,200 square foot unit you come up with $48,000 annually, or $4,000 per month. Applying that same $40psf to the 1,000 square foot unit you come up with $4,000 annually or $3,333. While the larger unit would rent for more, it wouldn't fetch nearly $700 extra per month. Now if you assume that the 1,200sf rents at $4,000 per month and apply a discount of say $200 a month for the smaller unit (making it $3,800 per month) the smaller unit is then renting at $45.60 per month.

It's pretty easy to take the same kind of logic and apply it across different types of units, as well as layouts. Additionally, since rental pricing/cost is dictated by income of the tenant people shop for what they can pay per month and not the ppsf.