$Rent / Month VS $Rent/sqft

[Spencer Gray]

There are several ways to look at rental revenue at a multifamily property with the two most widely used metrics being the nominal monthly rental rate for a unit and the monthly $/sq ft. 

In my experience the nominal $ rent per month is the more important metric as renters rarely looks at the $/sq ft rate when determining to rent or not - they are looking at what their monthly rent check is going to be.

$/sq ft is more widely used in other asset classes of commercial real estate, but it's also a key metric for multifamily development as the goal is to maximize the revenue of the entire building. 

I personally use the $/sq ft as a secondary metric that measures the perceived value of the unit in relationship to it's size. A prospect will probably not lease solely based on a low/high $/sq ft but the size of the unit is certainly a factor in the decision making process.

How do you use $/sq ft in analyzing a multifamily deal? Is it an important metric to you?