scott@bvcre.com

I am helping a client evaluate two different spaces and they made a comment about one space being a little larger & having a higher price. What I had pointed out, albeit subtlety, was that the two spaces had different building load factors. Literally, one building has a 15% load factor & the other has a 6% load factor. It occurred to me that small & mid-size tenants almost never ask about this issue. When I represent a building owner, I almost always bring up the difference between actual square feet and rentable square feet; if they don’t fall asleep at that point, I may even discuss usable square feet.

But those factors are important to understand for tenants, so allow me to summarize them briefly and if you have more questions, give me a call.

USABLE SQUARE FEET = THE SPACE YOU CAN ACTUALLY USE

This is the space between the four walls. You can measure it and you can use it. It’s also rarely what you’re leasing. If the interior dimensions of an office are 30′ x 30′, you have 900 sf of usable space.

ACTUAL SQUARE FEET = THE USABLE SQUARE FEET, INCLUDING (FOR BREVITY’S SAKE), 1/2 OF THE WALL THICKNESS

In a multi-tenant building, you share the wall with your neighbor and so, 1/2 of the wall thickness is included in your space dimensions. How’s that work? Well, using our previous example, with a wall thickness of 6″ (for this example) the space dimensions are now 1/2 of 6″ PLUS 30′ PLUS 1/2 of 6″ in both directions. Now that 30′ x 30′ room is 30.5′ x 30.5′ = 930.25 sf (a 3.36% increase in size).

RENTABLE SQUARE FEET = ACTUAL SQUARE FEET PLUS A PRO-RATA SHARE OF COMMON AREA

Again, in a multi-tenant building, there are lobbies, common restrooms, hallways, etc and tenants pay their pro-rata share of those common areas. For simplicity, if a 100,000 sf building has 86,957 of leasable sf, their load factor is 15%. More sophisticated companies really review a building’s load factor and most of them will limit the load factor to 15% (yes, you can negotiate this issue).

This is how the building load factor is used: Take the actual square feet of a space & add the building load factor. Using a 15% load factor for our previous example:

930.25 asf * 1.15 (15% load factor) = 1,070 rsf

So, that 1,070 rsf space you’re looking to lease is really only 900 usf (in this example). That’s almost a 19% difference; not insignificant.

HOW TO COMPARE BUILDINGS WITH DIFFERENT LOAD FACTORS

To make a quick observation, we’ll have to neglect wall thickness since there are so many room configurations and wall differences, but we can make an observation between “actual square feet” and “rentable square feet.”

For my client, they were evaluating two buildings and one had a 6% load factor & the other had a 15% load factor. I’ll assume they both had the same rentable square feet for this example.

Building 1: 15% load factor, 4,000 rsf

4,000 rsf = ASF * 1.15 —> ASF = 4,000 rsf / 1.15 = 3,478 asf

Building 2: 6% load factor, 4,000 rsf

4,000 rsf = ASF * 1.06 —> ASF = 4,000 rsf / 1.06 = 3,774 asf

SUMMARY

That’s a 296 rsf (8.5%) difference (maybe 2 more offices or a conference room)