Price per square foot is a property's price or rent divided by its area in square feet, expressed as a dollar figure such as $185 PSF. In commercial real estate it standardizes value across buildings of different sizes, letting an operator compare sale prices and lease rates on a common per-unit basis before deeper analysis.
How Is Price Per Square Foot Calculated?
Price per square foot is calculated by dividing the transaction price by the property's rentable area in square feet. The sale formula is PSF = Sale Price / Square Feet. Per Altus Group and Wall Street Prep, the metric normalizes value across differently sized assets, turning a headline price into a comparable per-unit figure that operators use to benchmark deals.
The same logic applies to leases, where rent is quoted per square foot, usually per year in the United States. A tenant leasing 1,000 square feet at $15 PSF pays $15,000 in annual base rent. Because the denominator can be measured as rentable or usable area, an analyst must confirm which area basis a quote uses before comparing two figures.
Input | Definition |
Price or rent | The sale price for value PSF, or annual rent for lease PSF |
Square feet | The rentable or usable area used as the denominator |
Price per square foot | Price or rent divided by square feet, expressed as $/SF |
Why Price Per Square Foot Matters
Price per square foot matters because it is the fastest apples-to-apples comparison in commercial real estate, letting an operator rank a 12,000 square foot building against a 40,000 square foot one on identical terms. Brokers, appraisers, and underwriters quote PSF because it strips out size and exposes the value or rent that actually differs between assets.
The caution is that PSF hides everything the denominator ignores. A low sale PSF can reflect deferred maintenance, a weak location, or short lease term rather than a bargain. On the lease side, a gross PSF quote bundles taxes and common area maintenance that a net quote excludes, so two PSF numbers are only comparable when the lease structure and area basis match.
Example
An investor compares two office listings. Building A is priced at $7,400,000 for 40,000 square feet. Building B is priced at $2,400,000 for 12,000 square feet. Building A's price per square foot is $7,400,000 / 40,000, or $185 PSF. Building B's is $2,400,000 / 12,000, or $200 PSF.
Property | Price | Square feet | Price per square foot |
Building A | $7,400,000 | 40,000 | $185 |
Building B | $2,400,000 | 12,000 | $200 |
On price per square foot alone, Building A is the cheaper asset at $185 versus $200. That signal is only a starting point: if Building B carries higher rents or a superior location, its $15 PSF premium may be justified once income and quality enter the analysis.
Variations and Edge Cases
Price per square foot shifts by asset type, market, area basis, and whether the figure describes a sale or a lease, so a number that looks strong in one context can mislead in another. The table below shows representative national lease benchmarks and the adjustments an analyst should confirm before comparing two PSF figures.
Variant | Treatment |
National office asking rent | About $33.61 PSF as of May 2026, per CommercialCafe / CommercialEdge |
National industrial asking rent | About $8.44 PSF in-place, per CommercialEdge; coastal hubs can exceed $12 |
National retail asking rent | About $24.59 PSF in Q1 2026, up 2.4 percent year over year, per market reporting |
Gross vs net PSF | A gross quote includes taxes and CAM; a net quote excludes them |
Rentable vs usable area | Rentable area includes a share of common space, so it raises the denominator |
The most common mistake is comparing a gross lease PSF against a net lease PSF. A $30 gross quote and a $22 net quote can describe similar total occupancy cost once the net tenant's added taxes and common area maintenance are layered on.
Price Per Square Foot vs Cap Rate
Price per square foot is often confused with cap rate, and they measure different things. Price per square foot is price divided by area, a size-normalized value metric that ignores income. Cap rate is net operating income divided by price, a return metric that reflects the income the asset produces. One compares value; the other prices yield.
The practical result is that PSF is faster but cruder. PSF needs only price and area, making it ideal for a first pass across many listings, and it applies even to vacant or non-income properties. Cap rate needs a full income and expense picture, making it the metric that actually underwrites return. Operators screen with PSF, then underwrite with cap rate.
Frequently Asked Questions
How do you calculate price per square foot?Price per square foot is the price or rent divided by the property's area in square feet. If a building sells for $7,400,000 and contains 40,000 square feet, the price per square foot is $185. For leases, a 1,000 square foot space at $15 PSF costs $15,000 in annual base rent.
What is the average price per square foot for office space?The national office asking rent averaged about $33.61 per square foot as of May 2026, per CommercialCafe reporting on CommercialEdge data, roughly 1.4 percent below the prior year. Rates vary widely by market, building class, and lease structure, so a national average is only a rough benchmark.
What is the difference between gross and net PSF?A gross PSF quote includes the tenant's share of taxes and common area maintenance, while a net PSF quote excludes them. This is why two PSF figures are only comparable when the lease structure matches, since a low net quote can carry high added charges.
Related Terms
Appraisal
Cap Rate
Common Area Maintenance
Gross Rent Multiplier
Base Year