How is a rent factor determined in commercial leasing?

In commercial leasing, a rent factor is significantly influenced by the owner's desired return on investment. The rent factor serves as a metric to evaluate how much rent a property owner needs to charge to achieve a specific financial objective, usually reflective of the property's costs, mortgage obligations, or required yield.

When determining the rent factor, the owner will consider their investments in the property, such as acquisition costs, ongoing expenses, and the expected return. If the owner has a clear goal for their return—be it a certain percentage of the property's value or a fixed amount of profit—this desired return critically shapes the rent they set.

Other factors, such as market value, local rental rates, or tenant sales performance, can provide context or additional considerations in the broader analysis. However, the definitive calculation of the rent factor focuses primarily on what the owner aims to achieve in terms of return, making it the foundational element in determining rental rates.