Calculating square footage for a commercial real estate lease can be confusing. However, once you understand each of the components that go into the calculation, it gets much more clear.
First, let’s quickly review usable square feet and rentable square feet from our blog post last week:
Usable Square Feet– All space that is used exclusively by a tenant.
Rentable Square Feet– Usable square footage plus a portion of the building’s shared space that also benefit each tenant (lobbies, shared restrooms, hallways, etc.)
Common areas are shared spaces within the building that benefit each tenant (lobbies, shared restrooms, hallways, building amenities like fitness centers, etc). Each tenant must pay for their pro-rata share of a building’s common areas. In multi-tenant office buildings, rent is calculated by the square footage in the specific office suite, plus the tenant’s proportionate share of the common areas in the building, which is calculated using the load factor.
Calculating Load Factor:
The load factor of the building is based on the percentage of common areas in a given building. The formula is:
Building Rentable Square Feet / Building Usable Square Feet
Therefore, if Building A has a total square footage of 100,000 and 85,000 usable square footage, the load factor would be 1.15.
The load factor is then multiplied by the tenant’s usable square feet to come up with the tenant’s total rentable square feet. Ie- if a tenant has 5,000 usable SF in their suite in Building A, this number is multiplied by 1.15 to find the rentable square feet. Therefore, this tenant has 5,750 rentable square feet.
Katie Boova is Marketing Manager at Watchdog Real Estate Project Managers, a real-estate consulting firm that provides owner’s representation and project management services. More about Watchdog Real Estate Project Managers as well as additional blog posts can be found here.