Common Area Factor Analysis: Profitable vs. Usable Square Footage

why pay Rent for a space you don’t occupy?

Commercial real estate is surrounded by many concepts that tenants and even real estate professionals do not understand. An example is the measurement of office space for rental purposes. The method used to determine the amount of rent in most office leases includes both the usable square footage and the tenant’s proportionate share of the most common areas of the building.

Usable square footage

Usable square footage has been used in many areas when it comes to office space. Implying? Well, usable footage is the amount of space you inhabit. For smaller tenants, usable square footage is the area of ​​vacant space within your office without exclusions for entry or exit doors or structural columns. This means that the space is measured as if the columns were not there. However, there are things like janitor closets, restrooms, elevator lobbies, and public hallways, and you only pay for the space they take up with the other tenants using these facilities.

Well, for full-story or multi-story tenants, usable square footage includes everything inside the glass line, including janitor closets, bathrooms, and electrical rooms. Therefore, like other tenants, full-floor or multi-floor tenants must also pay part of the share of the place or common area in the building.

Tea Common area factor

What is this factor? This is a number that refers to shared spaces on a single floor within a given building. Spaces may share common areas, such as elevator lobbies and restrooms, on a pro rata basis, or perhaps main building lobbies and amenities used by all building tenants.

That said, this factor falls into two categories;

· Tea 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.

· Tea Common area factor of the building; refers to common areas intended for all tenants of the building. It goes from 6 to 8 percent.

In general, the common area factors help determine the actual square footage that the tenant is required to pay in terms of rent. If the landlord or other leasing agent quotes a common area factor, include the total of the floor and building common area factor. This means that the total common factor for most office buildings is between 12% and 20% depending on the design of the building.

Rental Square feet

One square foot of rental is defined as the area of ​​enclosed interior space in a given building omitting holes in the floor, such as stairwells, as well as elevator space and mechanical chute. Whatever you can afford to stand on, you need to pay for it as it is a profitable space. This includes janitorial closets, restrooms, electrical and phone rooms, just to name a few.

To calculate usable square footage for, 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 Profitable vs. Useful Square Footage;

Rsf = usf x (1+% additional)

Additional % = (Leasable Sq. Ft./Usable Sq. Ft.-1)

Comparison of various buildings

When evaluating space options, it is important to remember that most buildings have different common area factors, as well as the dimensions or shape of the floor plate. These factors can have a major impact on the space plan and the amount of usable square footage needed. When comparing multiple buildings from things like finances, it’s crucial to use a cost per usable square foot (USF) metric to ensure your options are perfectly evaluated.

Of course, you need the right space that fits your budget and workplace criteria. But, two buildings with the same face rental rate have different economics 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. You must have good technical skills to evaluate various options in order to reach a conclusive decision.