Understanding Rentable vs Usable Square Footage (and Common Areas)
When looking for new office premises, you may notice that listings advertise office space using different terms, such as usable, rentable or common area square footage. It’s important to understand what each of these terms means, so you can choose an office that suits your space requirements and budget.
In this article we look at the differences between usable, rentable, and common area square footage, and we discuss what tenants need to be aware of when evaluating and budgeting for their space requirements.
Contents
Usable Square Footage
This refers to the amount of space each tenant has exclusive access to. The specific inclusions and exclusions vary depending on whether the office in question takes up an entire floor, or the floor is shared with other tenants.
In full-floor setups, usable square footage includes every area within the floor, whether it’s used by office workers or not. This includes workspaces, restrooms, kitchens, breakout rooms, common areas, reception areas, meeting rooms, hallways, as well as rooms used for technical and janitorial purposes. The only exclusions are any areas that aren’t exclusively used by the tenant occupying that floor, such as stairwells or elevator shafts. These are part of the unit’s gross square footage, which isn’t taken into account for determining lease rates.
In multi-tenant floors, usable square footage includes workspaces and any other rooms allocated for the specific use of each tenant. For example, shared bathrooms or kitchenettes wouldn’t be included, but if each tenant has exclusive use of a restroom, this is added to the office’s total usable square footage.
Rentable Square Footage
Rentable square footage is the figure used to determine a tenant’s annual base rent. In office leases, base rent costs are quoted per square foot/year, so it’s important to understand what exactly is included on each base rent square foot.
This is where the concept of rentable square footage comes into play. To calculate rentable square footage for it, you need to know two elements:
Rentable square footage = total usable square footage + pro rata share of the building’s common space.
Because the entire building’s common space is taken into account (and not just the workspace or common areas on a given floor) rentable square footage can be substantially higher than actual workspace. In most cases, it accounts for an extra 12% to 20% on top of usable square footage.
When visiting the premises and talking to a landlord or agent, you’ll want to ask about the building’s total common areas, as this has a direct impact on rental rates. Before looking at rentable square footage in a commercial space in more detail, we need to define what common areas include.
Common Area Square Footage
This term refers to all areas of the building that are accessible to tenants. They may include the building’s lobby and reception (as opposed to reception areas on each floor or for each tenant, which are part of usable square footage), restrooms for tenants and visitor use, hallways, and any other amenities located inside the office building such as gyms, cafeterias, storage units, building management offices, technical or mechanical rooms, etc.
Common area square footage is expressed as a percentage and represents each tenant’s share of common spaces. Shares are not equally allocated, instead, they’re determined taking into account the square footage of each office.
To calculate the share of common area square footage, you divide the building’s total area by your office’s total area, and turn the result into a percentage. For example, let’s say you’re interested in leasing a 10,000 square feet office in a 100,000 square foot building. The common area share would be 10%, because 100,000 / 10,000 = 10.
What is Common Area Load Factor?
The calculation above determines your share of common area square footage, which is also called “the load factor”.
The load factor percentage isn’t an indicator of how much common area space you can use. In the example above, a common area factor of 10% doesn’t mean you can use 10% of the building’s common areas, so a higher load factor doesn’t imply more use rights or extends the square footage of your lease in any way.
Instead, the load factor is used to determine the amount of space for which you’ll be paying rent. To calculate how much square footage the load factor adds, use this formula:
- Usable space x load factor
- Add the result to your usable space figure
Above, a load factor of 10% is added to the total usable office space to obtain the rentable square footage value:
10,000 x 0.10 = 1,000
10,000 + 1,000 = 11,000
This means that your base rent would be calculated on the basis of 11,000 square feet.
Things to Consider When Looking for Office Space
The load factor is an important consideration when evaluating and budgeting for office space requirements. Understanding its implications can put you in a better position to negotiate the terms and conditions of an office lease.
Other things to consider include:
- The load factor isn’t always neatly calculated as a share of common area space. Some agents or landlords may quote figures that are more or less proportional to your actual share. Always check how much space the load factor is adding on top of actual office space, remembering that 10% to 20% is the norm and anything above would need to be carefully considered.
Some situations where the load factor isn’t easily determined or may not be proportional include:
- Renovated offices or new builds.
- Repurposed offices or office space in venues not initially designed for this purpose, for example when leasing offices in shopping malls. In such scenarios, the load factor could be arbitrary or excessive given the large square footage of the venue where the office is located.
- Don’t forget about maintenance expenses associated to common areas, usually calculated as a pro rata share resulting from dividing your office unit’s square footage by the total amount of office space in the building. Maintenance expenses aren’t part of the load factor, but add to your total costs and their value varies depending on occupancy levels, office plate size, etc.
Always bear in mind that usable square footage figures are used to determine whether an office will be able to accommodate staff and operate with ease, whereas rentable square footage figures are taken into account for financial and budgeting purposes.
Contact Us Today
Now that you’re aware of the differences between rentable square feet and usable square feet – as well as common area factor – it’s time to rent your very own workspace. The expert commercial real estate team at Offices.net are here to connect you and your business to the ideal office space anywhere in the United States. From major office buildings in New York City to flexible coworking spaces in Austin, Offices.net does all the heavy lifting to ensure that you get exactly what you need, contact us today.
