If you’re a real estate investor, you’ve probably looked at a lot of offering memorandums from brokers, or statistics on multifamily buildings, and noticed rents shown on a per square foot basis.
And you might wonder why they do that instead of just talking about the rents. There are a couple of reasons, and they’re all about making comparisons easier and more accurate.
Reason 1: Apartment Buildings Often Have Units of Different Sizes
The number one reason is simple. In apartment buildings, you have units of different sizes.
You might have one-bedrooms, two-bedrooms, three-bedrooms, studios, whatever it may be. Even if two units have the same bedroom count, they might not be the same size. One might be 650 square feet, and another might be 850.
Rent per square foot acts like an equalizer across the board.
Instead of trying to compare a bunch of unit rents that are influenced by size, it helps you normalize the information so the numbers are speaking the same language. It becomes easier to compare what’s happening inside a single building, and it becomes easier to compare one building to another.
Reason 2: Consider the “Space for the Money”
The second reason ties back to size again, but in a slightly different way.
You might have newly constructed apartments, and those are generally going to be smaller than some of the older stuff you’ll find. Older buildings can offer a lot of square footage for the money.
That’s why a per square foot number helps. It can equalize the fact that a tenant might be getting a much larger unit and, consequently, might be willing to pay more if they’re getting more square feet, even though the bedroom count might be the same.
If you only look at rent per unit, the bigger unit can look “expensive.” But when you look at rent per square foot, you can see whether it’s actually expensive, or whether it’s just larger.
Reason 3: It’s Easier to Gauge the Overall Market
The third reason is that it helps you gauge the overall market quickly.
When you’re looking at different unit counts and sizes across the industry, a per square foot metric makes it easier to compare markets. An investor can look at a market and say:
- Rents are $1.50 per square foot here
- They’re $1.80 per square foot over there
- Or they’re $2.00, $2.50, and so on in other regions
That’s a much faster way to understand the pricing environment than trying to compare a bunch of one-bedroom rents across different cities where the unit sizes are not consistent.
It’s not that rent per unit is useless. It’s that rent per square foot is a cleaner comparison tool when you’re trying to understand how expensive space is in one market versus another.
Why Rent Per SF Matters
This metric matters just as much to developers as it does to investors, because it gives them a quick reality check.
When developers are looking at a market, rent per square foot is an easy gauge for them to say, “We know we have to be able to hit $2.25 a square foot in order to be able to afford to build this building.”
Or they might look at the same market and say, “If we can get it to $1.80 a square foot, we can afford to do a garden-style building here as well.”
That’s the point. Rent per square foot makes it easier for players in the market to make a qualified decision quicker and easier, without getting lost in the weeds of unit mix and floor plans right at the start.
Final Thoughts
Rent per square foot in multifamily properties is not just a reporting preference. It is a practical metric that helps equalize unit sizes, compare new and old construction, and evaluate entire markets more efficiently.
Many investors we work with appreciate using this metric to quickly understand how a property fits within its market and whether the numbers make sense. If you are reviewing multifamily opportunities in Pennsylvania or Maryland and want help interpreting market data, contact us to discuss how to evaluate properties with confidence.
