What Is The Difference Between Rentable Area And Usable Area

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Rentable Area vs Usable Area

In terms of commercial office space, size counts. After all, you don’t want to wind up with a lot of vacant floor space. However, you still want to make sure that your team has enough space to comfortably move during their workdays. Additionally, the size will affect the monthly rent payment. It’s critical to recognize that your lease will include two separate sizes: usable and rentable square footage when calculating the cost of occupying a specific office. In order to compare different offices and negotiate a fair contract, it is essential to understand what these terms mean.

Usable Area Or Usable Square Footage

The office’s useable square footage will reveal how much room your business will need to occupy. The entire floor area included within the walls of the space you are renting is included. You must take into account this figure when determining if a given workplace is the right size for your requirements.

How To Determine Usable Square Footage

The real area of your space as determined within the demising external walls of your unit is your usable square footage. If your area is rectangular and measures 50 feet by 80 feet, you would multiply 50 feet by 80 feet to get 4,000 usable square feet. If the shape you’re working with is more complicated, you can utilize the techniques you learned in geography. Alternatively, you can rely on the measurements an architect, engineer, or space planner provides.

Rentable Area Or Rentable Square Footage

A portion of the floor space devoted to all communal amenities in the building is added to the usable square footage of an office to determine its rentable square footage. This assessment may take into account stairwells, public restrooms, corridors, lobbies, cafeterias, gyms, and even on-site property management offices. The rentable square footage, not the usable square footage, is used to determine your rent because lease agreements compel tenants to contribute to the expense of maintaining communal areas.

How To Determine Rentable Square Footage

Your usable square footage plus your proportionate share of the building’s communal areas equals your rentable square footage. You must know the building’s entire usable area as well as its total rentable area in order to calculate it. Imagine a structure that is 50,000 square feet in size, of which 42,000 are functional, and 8,000 are used for communal spaces. You would calculate your pro-rata share by dividing 42,000 by 4,200 to discover that you own 10% of the building if you have a 4,200-square-foot usable space. Your proportionate share is that. The total common space (8,000 sf) is then multiplied by your proportionate share (10%). This allocates you 800 square feet of the common area as your portion. You have a total rentable square footage of 5,000 sf when you add the 800 sf of the common space and the 4,200 sf of the usable area.

Why It’s Important

Usable and rentable square feet have different meanings depending on how they are calculated. The rentable square feet are what will be used to determine your annual rent expense. Using the right dimensions when evaluating a budget is key because space might be more profitable than necessary due to its square footage.

Load Factor

A load factor is a useful tool that renters and landlords use to determine the difference between a facility’s rentable square feet and usable square feet. Based on the proportion of communal space in the building, this figure has been calculated. The building’s total rentable square footage is divided by its total usable square footage to determine the load factor.

Load factor = total rentable square footage / total usable square footage

The rentable square footage for the space is then calculated by multiplying this load factor by the tenant’s usable square footage.

Rentable square footage = tenants’ usable square footage x load factor

A renter is comparing two office locations that have different load factors but the same amount of usable square footage and the same leasing price. With a 20 percent load factor and a suite with 10,000 usable square feet, the first choice offers a space with 12,000 rentable square feet. The rentable square footage for the second choice would be 11,500 because it has a 15 percent load factor and 10,000 useable square feet.

Example 1:

  • 10,000 usable feet x 20% = 2,000
  • 2,000 + 10,000 = 12,000 rentable sq.ft.

Example 2:

  • 10,000 usable feet x 15% = 1,500
  • 1,500 + 10,000 = 11,500 rentable sq.ft. 

The tenant’s base rent in the first building would be based on 12,000 square feet, while the rent in the second building would be based on 11,500 square feet. The second alternative with the lower load factor would cost less per month for the same amount of usable space, saving the business money. However, because there are fewer common areas in the building due to the decreased load factor, paying a higher rent may be necessary if more common areas are wanted.

Conclusion

The space you lease isn’t the space you pay for in the majority of office buildings. Your lease is based on your rentable square footage, even though you are occupying your useful square footage. Your overall bill could be up by between 10% and 30% as a result. While these costs are unavoidable, being aware of them can help you set a reasonable budget. In addition, you can consider a building that was constructed more effectively to lessen its impact.

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