How are retail spaces usually leased?

Retail spaces are typically leased by the square foot as an annual dollar amount because this method provides a standardized and transparent way of calculating rent based on the size of the space being rented. This approach allows landlords to set rents based on market rates for specific locations and enables tenants to easily compare costs across different properties.

This leasing structure is particularly common in commercial real estate because it aligns with the business model of many retail operations, which have varying sales volumes and operational scales. The price per square foot can vary widely depending on factors such as the location, the type of retail space, and the amenities included, making this option attractive for both landlords and tenants.

In contrast, leasing as a fixed monthly fee or through a percentage of sales may not accurately reflect the fair market value or the actual usage of the space, which is why the per-square-foot methodology is often favored in retail leasing arrangements.