This post originally appeared on tBL member Kevin Cronin’s Insights Blog and is republished with permission. Find out how to syndicate your content with theBrokerList.
- DEFINITION: Usable Square Footage (USF) is the actual and exclusive space you occupy inside your suite where you conduct your business. Usable square footage does not include common areas of a building such as lobbies, shared restrooms, stairwells, storage rooms, and shared hallways.
So far, the math is simple. Determine the number and size of offices, conference rooms, etc… plus an estimate of space needed for circulation (hallways/corridors) inside your suite and you can roughly estimate your usable space requirement.
Now that you’ve developed an estimate of the amount of space you’ll need, it should be straight forward to identify the space alternatives that meet your size and budget requirements. But it’s not. Because, while tenants understand and think in terms of their usable space needs and budget limitations, commercial office space is typically marketed as rentable square feet.
- DEFINITION: Rentable Square Footage (RSF) is the usable (actual and exclusive) square footage plus a load factor (portion of the building’s shared or common areas). Each tenant pays for these common areas in proportion to the amount of space they lease in the building. Typically, commercial office rents are based on rentable (RSF) not usable square footage (USF).
Office tenants understand that you can’t determine rent without the rental rate and square footage. What they often don’t understand is that load factor is the variable in the rent equation used to calculate the rentable square footage.
- DEFINITION: Load Factor (LF) is the add-on factor in your rent equation that accounts for the building common areas outside your suite (lobbies, shared restrooms, stairwells, storage rooms, and shared hallways, etc..). Load factors commonly range between 10% and 20%.
The load factor is applied to the tenant’s usable square footage to convert it to rentable square footage. Understanding how square footage is calculated is essential to determining the best size fit and value for your office space.
For example, two alternatives with the same rentable square footage may appear equal but they aren’t.
- Option 1: 10,000 RSF with 20% LF = 8,333 USF
- Option 2: 10,000 RSF with 10% LF = 9,090 USF
From a tenant’s perspective, with the differences in load factor (20% vs 10%) you gain 757 usable square feet (9,090 USF – 8,333 USF) in Option 2 versus Option 1.
For this reason, it’s important to understand how square footage calculated on your commercial office lease.
