Arizona Commercial Property Lease Rate Calculator
Calculate estimated commercial property lease rates in Arizona for NNN, Gross, and Modified Gross lease structures. Includes market-based adjustments for major Arizona metros and property class factors.
Formulas Used
1. Adjusted Base Rate:
Adjusted Rate ($/SF/yr) = Base Rate × Market Factor × Class Factor × Property Type Factor
2. Effective All-In Rate:
• NNN: Effective Rate = Adjusted Base Rate + NNN Expenses (tenant pays all operating costs)
• Full Service Gross: Effective Rate = Adjusted Base Rate (landlord absorbs all NNN)
• Modified Gross: Effective Rate = Adjusted Base Rate + (NNN Expenses × 0.50)
3. Monthly Rent:
Monthly Rent = (Effective Rate × Rentable SF) / 12
4. Annual Escalation (Compound):
Year n Rate = Year 1 Rate × (1 + Escalation%)^(n−1)
5. Total Lease Value:
Total = Σ [Annual Effective Rent × Year Fraction] for each lease year
6. Net Effective Rate (NER):
NER = (Total Effective Rent − Free Rent Value) / (SF × Lease Term in Years)
7. Landlord NER:
Landlord NER = Tenant NER − (TI Allowance $/SF / Lease Term Years)
8. Arizona Transaction Privilege Tax (TPT):
Total TPT Rate = State (5.6%) + County (~0.7%) + City (1.5%–2.6% by market)
Monthly TPT = Monthly Effective Rent × Total TPT Rate
Assumptions & References
- Market adjustment factors derived from CoStar Group Arizona Market Reports (2023–2024) and CBRE Arizona MarketView Q4 2023.
- Arizona Transaction Privilege Tax (TPT) applies to commercial lease income under A.R.S. § 42-5069. State rate: 5.6%; county rates vary (~0.7% average); city rates sourced from Arizona Department of Revenue (ADOR) TPT rate tables.
- NNN expenses (taxes, insurance, CAM) estimated at $5–$9/SF/yr for Arizona commercial properties; actual expenses vary by property age, location, and management.
- Class A/B/C factors based on BOMA International building classification standards and local Arizona market data.
- Property type factors reflect relative market demand: Medical Office commands a premium (~25%) over standard office; Industrial trades at a discount (~32%) reflecting high supply in Phoenix metro.
- Free rent periods are applied at Year 1 effective rates and deducted from total lease value.
- TI allowances are amortized straight-line over the lease term for NER calculation purposes.
- This calculator provides estimates only. Consult a licensed Arizona commercial real estate broker (ARS § 32-2101) for binding lease negotiations.
- Rates do not include broker commissions (typically 4–6% of total lease value in Arizona).