The difference between usable and rentable square footage

On Behalf of | Dec 21, 2020 | Real Estate Law | 0 comments

Even in the persistently-hot Bay Area, finding suitable long-term commercial tenants can be challenging. While there are a variety of ways for commercial landlords to accomplish this objective, creating accurate and compelling marketing copy is often essential.

When listing your commercial space, you may want to identify both usable and rentable square footage. After all, you do not want potential or new tenants to feel you have misled or otherwise deceived them. You also probably want to calculate the add-on factor for every commercial space you have for rent.

Usable square footage

Usable square footage is the amount of commercial space a tenant may use exclusively. For example, if a tenant is looking to rent an office in a building with many other offices, the usable square footage is the space the tenant occupies alone.

Rentable square footage

Many commercial buildings have common areas tenants may use, although they may not do so exclusively. Common areas generally include the other space tenants may access as part of their negotiated commercial lease, such as lobbies, community restrooms, stairways, shared conference rooms or cafeterias. Common areas may also include areas of the building that no tenant may access, such as building basements and utility raceways.

Rentable square footage accounts for this communal and unoccupied space. This is usually done by adding additional square footage, calculated as a portion of the common areas and other non-leasable building areas allocated to the usable square footage, onto the usable square footage.

The add-on factor

Both to communicate accurately with potential tenants and to realize a profit, you should probably know the add-on factor of your commercial space. Also known as the load factor, the add-on factor is the percentage difference between usable square footage and rentable square footage. There are different ways of calculating the load factor and rentable square footage; the most commonly used method is to use the guidelines published by the Building Owners and Managers Association International.

When marketing your commercial space, you probably do not need to list the add-on factor. Still, to ensure you remain competitive in the market, you must always keep your space’s add-on factor in mind when negotiating leases with your tenants.