Percentage Rent Calculator Formula

Understand the math behind the percentage rent calculator. Each variable explained with a worked example.

Use the Percentage Rent Calculator

Formulas Used

Annual Percentage Rent

pct_rent = percentage_rent

Total Annual Rent (base + percentage)

total_annual_rent = total_rent

Sales Above Breakpoint

sales_above_break = sales_over_breakpoint

Average Monthly Total Rent

monthly_total = total_rent / 12

Total Rent as % of Sales

effective_occupancy_rate = annual_gross_sales > 0 ? total_rent / annual_gross_sales * 100 : 0

Variables

VariableDescriptionDefault
annual_gross_salesAnnual Gross Sales(USD)800000
natural_breakpointNatural Breakpoint(USD)600000
percentage_ratePercentage Rent Rate(%)6
annual_base_rentAnnual Base Rent(USD)36000
sales_over_breakpointDerived value= annual_gross_sales > natural_breakpoint ? annual_gross_sales - natural_breakpoint : 0calculated
percentage_rentDerived value= sales_over_breakpoint * percentage_rate / 100calculated
total_rentDerived value= annual_base_rent + percentage_rentcalculated

How It Works

Percentage Rent in Retail Leases

Percentage rent is additional rent paid by retail tenants based on their gross sales above a breakpoint threshold.

How It Works

1. Tenant pays a guaranteed base rent regardless of sales 2. When gross sales exceed the breakpoint, tenant pays additional rent as a percentage of the overage

Breakpoint Types

  • Natural breakpoint: Base Rent / Percentage Rate (e.g., $36,000 / 6% = $600,000)
  • Artificial breakpoint: A negotiated threshold that may differ from the natural breakpoint

    • Percentage Rent Formula

    Percentage Rent = (Gross Sales - Breakpoint) x Percentage Rate

    Common Percentage Rates by Type

  • Supermarket: 1-2%
  • Department store: 2-3%
  • Restaurant: 5-7%
  • Specialty retail: 5-8%
  • Service businesses: 6-10%

    • Worked Example

    A retail tenant with $800,000 in annual sales, $36,000 base rent, 6% percentage rate, natural breakpoint at $600,000.

    annual_gross_sales = 800000natural_breakpoint = 600000percentage_rate = 6annual_base_rent = 36000
    1. 01Natural breakpoint: $36,000 / 6% = $600,000
    2. 02Sales above breakpoint: $800,000 - $600,000 = $200,000
    3. 03Percentage rent: $200,000 x 6% = $12,000
    4. 04Total annual rent: $36,000 + $12,000 = $48,000
    5. 05Average monthly rent: $48,000 / 12 = $4,000
    6. 06Total rent as % of sales: $48,000 / $800,000 = 6.0%

    Ready to run the numbers?

    Open Percentage Rent Calculator