Understanding How Rentable Square Feet Is Determined

In leasing, Tenants need to know how their leasable / rentable square footage (rsf) is determined.  If you’ve ever purchased a residence, you understand that the size of the house is determined by the exterior measurements – “from corner to corner.”  When it comes to commercial property, the concept is very similar, but not well understood by people outside the commercial real estate industry.

Leasing A Stand Alone Building.  If you were to lease an entire building, the leasable / rentable square footage would be equivalent to the gross square footage of the building.  This is the same as when measuring the size of a residence – “corner to corner.”

Leasing Space In A Multi-Tenant Building.  In a multi-tenant building, the space calculation is different, but not that difficult to understand.  In a multi-tenant building, essentially, space measurement is the same with little exception.  Since you will share walls with your neighbor, half of the demising wall thickness is allocated to each tenant’s space.  In addition, all tenants are allocated a pro-rata share of the common areas (halls, restrooms, lobbies) and this is what commercial real estate agents will call the building load factor.

WHEN USABLE AREA ISN’T USABLE AREA

There are differences in what most tenants consider to be usable area than what the owners consider to be usable area.  You will find most owners use the industry standard (Building Owner’s and Manager’s Association or BOMA) in defining this term.

Usable Area – Tenant Usage:  To a tenant, the most common usage is to measure from the interior wall surface to the opposing interior wall surface, less major vertical penetrations (such as HVAC shafts & support columns going from floor to ceiling).

Usable Area – Industry Usage:  To owners & commercial real estate agents, a space also includes half of the wall thickness between tenants & to hallways.

CONVERTING USABLE AREA TO RENTABLE AREA

Using the “Usable Area as defined by BOMA, the next step is to allocate the building’s common area (for example: hallways, restrooms, and lobbies) to the usable area.  Each tenant is allocated a pro-rata share of the common areas since each tenant has access to those common areas.  For example, if a 115,000 sf building has 100,000 sf of usable area and 15,000 sf of common area, the allocation would be 15% (15,000 sf of common area / 100,000 sf of usable area).  The industry common definition of this factor is called Building Load Factor.  In this case the Building Load Factor is 15%.

PRACTICAL USAGE.

A typical application of Usable Area and Building Load Factor is as follows.  For a 1,000 sf (actual square feet) office suite the Building Load Factor is used to add and additional 150 sf of common area (1,000 x 15%) for a total of 1,150 square feet of rentable area (rentable square feet or rsf).

Comments are closed.