Total occupancy cost calculator

The lease headline is not the cost

A lease quotes base rent because that is the negotiated figure. What leaves your bank account is base rent plus common area maintenance, plus your share of the property tax, plus insurance, plus whatever else the lease passes through. On a modified gross or triple net structure those additions routinely add a quarter to a third on top.

Two consequences for a buyer. First, model the loaded figure, not the headline — the seller’s P&L shows the real number and the lease often does not. Second, understand which charges escalate and how, because a fixed base rent sitting under uncapped operating charges is not the fixed cost it appears to be.

The Commercial Rent Tax, if you are below 96th Street

New York City levies a Commercial Rent Tax on premises in Manhattan south of the centre line of 96th Street. Buyers from outside the city routinely have never heard of it, and it is a real line in the operating budget.

The published rules, as applied above:^[1]

• A return is required where annual gross rent paid exceeds $200,000.
• The tax applies where annualised gross rent paid is at least $250,000.
• The rate is 6% of base rent, and all taxpayers receive a 35% base-rent reduction, giving an effective rate of 3.9%.
• The small business credit effectively exempts tenants with total income of $5,000,000 or less and annual base rent before the reduction of less than $500,000. A partial credit applies on a sliding scale between $5m and $10m of income with rent between $500,000 and $550,000; above those, no credit.

Note the interaction the calculator makes visible: a business can sit above the rent threshold and still owe nothing because of the credit, and can lose that exemption purely by growing. If you are buying a Manhattan business near either limit, model the year you cross it.

Thresholds and credits are set by the city and change. Treat the figure here as an estimate and confirm with NYC Finance before relying on it.

The ratio is what makes it comparable

Occupancy cost as a percentage of revenue is how you compare two locations that are otherwise incomparable. It is also the number that moves when a lease escalates and revenue does not — which is why the year-five figure matters as much as today’s.

Run the year-five number against flat revenue. If the ratio becomes uncomfortable, you have found either a negotiating point on the escalation or a reason to think harder about renewal terms. Those terms, and the consent you will need to take the lease over at all, are covered in commercial lease assignment.