When you rent an office, you do not just rent the space, but you gain access to shared areas within the building like lobbies, hallways, restrooms. Landlords don’t allow you to use that space free of charge. Instead, they tack it onto the area that you rent as a ratio. Also mentioned as a core factor or a load factor, understanding your building’s load is vital to getting visibility into expenditure.
Calculating square footage for a billboard land lease is often confusing. However, once you understand each of the components that enter the calculation, it gets far more apparent.
First, let’s quickly understand usable square feet and rentable square feet:
Usable Square Feet
Usable Square Feet is all space that’s used exclusively by a tenant. USF covers the particular square footage you and your employees will utilize to be as creative as possible and obtain that paper!
Please confine mind that if you occupy one or more full floors of a multi-tenant office block, your USF will include the hallways and restrooms for every entire floor occupied.
Rentable Square Feet
Rentable Square Feet or RSF encompasses the total square footage of a specific building, including leasable/usable square footage and non-leasable/common area square footage. Once you review a floorplan for the office space you’re considering to lease, you regularly see RSF and USF numbers.
The RSF is that the number on which your base rent and operating cost costs are going to be calculated and typically includes all building common areas, covered walkways, and overhangs, also because of the lobby, scheduled tenant use conference rooms, mail receiving/package drop-off areas, restrooms, maintenance, operations, and utility closets, elevator systems, mezzanines, garages, and the other regions commonly accessed by all tenants.
What is the Load Factor?
The percentage of unusable space is the load factor in real estate. Actual rent the user pay is calculated using the load factor.
Common areas are shared within the building that benefits each tenant (lobbies, shared restrooms, hallways, building amenities like fitness centers, etc.). Each tenant must buy their pro-rata share of a building’s common areas. In multi-tenant office buildings, rent is calculated by the square footage within the specific office suite, plus the tenant’s proportionate share of the common areas within the building, which is calculated using the ratio. And that ratio is termed as the load factor.
Read More: Load Factor Vs Loss Factor
How to Calculate the Load Factor?
The ratio of the building is predicated on the share of common areas during a given structure.
The formula is:
Building Rentable Square Feet / Building Usable Square Feet
Therefore, if Building A features a total square footage of 100,000 and 85,000 usable square footage, the ratio would be 1.15.
The ratio is then multiplied by the tenant’s usable square feet to return up with the tenant’s total rentable square feet. I.e., if a tenant has 5,000 usable SF in their suite in Building A, this number is multiplied by 1.15 to seek out the rentable square feet. Therefore, this tenant has 5,750 rentable square feet.
For example, if you’re trying to find 10,000 square feet to lease and a building features a 15% ratio, you’ll be got to rent 11,500 RSF to possess 10,000 USF to work your business. A building with a 20% ratio would require you to rent 12,000 RSF to maintain 10,000 USF to work your business.
How The Ratio Affects Your income?
When considering multi-tenant office buildings, amenities like covered parking, weather-protected walkways, and alluring lobbies are impressive but can significantly increase your total rent spend. The upper the ratio is for any office block you’re considering, the rentable square footage you’ll need to lease or the medical office for rent.
Conclusion
Business is business, though, and therefore the purpose of an office is to possess an area to figure efficiently, collaborate, be creative, and generate revenue.
In business terms, you want to decide if the extra square feet you’ll be paying rent on (15% ratio versus 20% load factor) is well worth the spend.
