Why pay rent for a space you don’t occupy?
Commercial real estate is surrounded by many concepts that are misunderstood by tenants and even professionals in real estate. An example is the measurement of office space for rent purposes. The method used to determine the amount of rent in most offices leases include both the usable square footage, as well as the proportionate share of the tenant of the most common areas in the building.
Useable Square Feet
Usable square footage has been used in many areas when it comes to office space. What does it entail? Well, usable footage is the amount of space you inhabit. For the smaller tenants, the usable square footage is the area of the demised space found inside your office with no exclusions for entry or exit doors or structural columns. This means that the space is measured as though the columns are not there. However, things such as janitor closets, restrooms, elevator lobbies and public corridors exists and you only pay for the space they occupy with the other tenants who use these facilities.
Well, for the full floor or multi-floor tenants, useable square footage include everything inside the glassline, including janitor closets, restrooms and electric rooms. Therefore, just like other tenants, the full floor or multi-floor tenants must also pay part of the share of the common place or area in the building.
The Common Area Factor
What is this Factor? This is a number that refers to the shared spaces on a single floor within a given building. The spaces can be pro-rata share common areas such as elevator lobbies and restrooms, or perhaps the main building lobbies and amenities used by all the tenants in the building.
That said, this factor is divided into two categories;
· The Floor Common Area Factor; this refers to the common areas used by the tenant on that floor only. The numbers may vary from building to building, but it is eight percent of the floor factor.
· The Building Common Area Factor; refers to the common areas meant for all the tenants in the building. It ranges from 6 to 8 percent.
Overall, the common area factors help to determine the actual square footage which is to be paid for in terms of rent by the tenant. If the landlord or other leasing agent quotes a common area factor, it includes the total sum of the floor and building common area factor. This means that the total common factor for most office buildings ranges from 12% to 20% as per the design of the building.
Rental Square Feet
A rental square footage is defined as the area of the interior space enclosed in a certain building omitting the holes on the floor, such as stairwells as well as the elevator and mechanical duct space. Whatever thing you can afford to stand on, you have to pay for it since it is a rentable space. This includes janitor closets, restrooms, electrical and telephone rooms just to mention a few.
To calculate rentable square footage,say a particular tenant, all you have to do is multiply the usable square footage by the floor common factor, and then multiply the result by the building common factor.
The following formula can determine the Rentable Vs Useable Square Feet;
Rsf = usf x (1+ Add-on %)
Add-On % = (rentable sf/usable sf-1)
Comparison of Various Buildings
In the event of evaluating space options, it is important to remember that most buildings have different common area factors as well a floor plate dimensions or shape. These factors can impact more in the space plan and the amount of useable square footage needed. When comparing various buildings from aspects such as finance, it is crucial to use a cost per useable square feet (USF) metric in order to ensure that your options are perfectly evaluated.
Of course, you are in need of the right space that fits your budget and work place criteria. But, two buildings with the same face rental rate have a different economic due to common area factors and space design issues.
For this reason, it is good to work with a good tenant representation expert who clearly understands all the details of leasing office space. He must possess good technical skills to evaluate various options in order to arrive in a conclusive decision.
