For good measure: understanding how square footage is calculated in your lease.

• Author: Chappell, Mike
• Position: Money Talk

One of the complexities tenants face when entering into an office lease involves understanding the measurement of their space for the purpose of calculating rent. While this might seem like a simple square-footage calculation, it's usually anything but. In multi-tenant buildings, the number of square feet tenants "rent" is higher than the number of square feet they "use," typically by as much as 7 to 20 percent.

Here I will explain the methodology behind different square footage calculations to help you make better-informed leasing decisions.

Useable square feet vs. rentable square feet

The useable square footage (USF) of an office suite is the space a tenant occupies. In most cases, this area is calculated as if interior walls and columns don't exist. A tenant's rentable square footage (RSF) is the USF plus a portion of the building's shared or "common areas," including lobbies, restrooms, hallways, telephone and electrical rooms, and perhaps shared conference rooms, workout facilities and showers. Landlords require tenants to pay for their proportionate share of common areas and therefore the monthly rent is always calculated on RSF.

The difference between the RSF and USF is referred to variously as the "load factor," "loss factor," "common area factor," or "add-on factor." Expressed as a ratio, a building's load factor is calculated by dividing the RSF by the USF:

Load factor = Rentable square feet (RSF) / Useable square feet (USF)

For example, a building measuring 200,000 square feet with 25,000 square feet of common area would contain 175,000 USF, and therefore have a load factor of 1.143. One could also say the building has a load factor of 14.3 percent.

When evaluating office space options, tenants should compare load factors. Landlords or their representatives should be able to provide these numbers. A lower factor is indicative of a more "efficient" building, giving the tenant more useable space for the rental dollar. However, if a more elaborate office environment with more spacious common areas is desired, a high load factor (as much as 20 percent or higher) could be acceptable.

Industry standards

Further complicating a tenant's leasing decision is the fact that methods used by landlords to calculate USF and RSF can vary, making apples-to-apples comparisons difficult. In most U.S. cities, USF and RSF are calculated in accordance with standards established by the Building Owners and Managers Association (BOMA).

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