What is the Difference Between Usable and Rentable Square Feet?
These are terms you have probably encountered in your commercial real estate ventures. Knowing the difference between usable and rentable square feet is important in determining how you evaluate potential office space because rentable space is usually larger than space you will actually occupy and be able to utilize. So, what is the difference?
What is Usable Square Feet?
Usable square feet consists of the area the tenant will actually use for business. For a partial-floor lease, this includes the office space, storage, and private bathrooms. If the tenant is occupying a full-floor, usable square feet includes everything inside the boundaries of the floor except stairwells/elevators.
What is Rentable Square Feet?
Rentable square feet describes the space included when calculating rent. This will include common spaces used by all building tenants such as corridors, restrooms, lobbies, staircases, and meeting rooms. Because these spaces are used by all tenants, landlords will charge for these spaces. The tenants occupying the building pay for these common areas in proportion to the amount of space they lease. This is called a pro-rata share.
To calculate the rentable square footage, landlords use a load factor. To determine this number, we divide the total square footage by the usable square feet.
Load factor = total rentable SF / total usable SF
This number is then multiplied by the tenant’s usable SF to calculate the rentable square footage of the space.
Rentable SF = usable SF x load factor
Determining these numbers is important because the smaller the load factor, the less you are paying in rent for your space. If the load factor is smaller, there are less common spaces available in the building but the company ends up saving money. On the other hand, you may decide that the extra money you spent is worth the larger, fancier lobby. So think about this as you evaluate what is important to you in your business endeavours!
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