Gross, Net, and What's in Between: How to Calculate the Real Cost of an Office

"How much does this office cost?" — that's the first question every tenant asks, and almost always the answer they get covers only a third of the picture. The stated rent is a starting point. The real cost — the one that will appear in your profit and loss report — is 40% to 70% higher. Let's break it down, shekel by shekel.

Step 1: Translating Gross to Net

Gross area includes your proportional share of common areas: lobby, corridors, elevators, safe room. The ratio between gross and net is called the load factor, and it's the first number to clarify. Let's take an example we'll follow throughout: an office at 120 sqm gross at ₪85 per sqm, with a load factor of 15%. The area you'll actually receive: approximately 104 sqm net. The real price per net sqm: not ₪85 but approximately ₪98.

Step 2: Adding the Fixed Costs

• Rent: 120 sqm × ₪85 = ₪10,200 per month
• Management fees: 120 sqm × ₪20 = ₪2,400 per month
• Municipal tax: at ₪320 per sqm per year ≈ ₪3,200 per month
• Electricity for AC and lighting: typically ₪800–₪1,500 per month
• Contents and third-party insurance: ₪200–₪400 per month

Running total: the "₪10,200" office actually costs approximately ₪17,000–₪17,700 per month. And that's still not the full picture.

Step 3: The One-Time Costs Everyone Forgets

• Fit-out: even at a basic level — paint, kitchenette, two plasterboard walls — budget ₪150,000–₪400,000, or spread over the lease if the landlord participates
• Bank guarantee: annual fee of approximately 1%–2% of the guarantee amount, plus the credit line it ties up
• Brokerage fee: one month's rent plus VAT (one-time)
• Moving costs: removals, IT infrastructure, signage — typically ₪30,000–₪80,000

Step 4: The Number That Really Matters — Total Cost Per Net Sqm

Take the total monthly cost (₪17,500 in our example) and divide by the net area (104 sqm): approximately ₪168 per net sqm per month. This is the comparison number between properties. A "cheap" office with a high load factor, expensive management fees, and downtown municipal tax rates can end up more expensive than an "expensive" office in an efficient building.

Want us to run this calculation for you on a specific property? Send us the details and we'll get back to you with the full picture — no surprises.