If you are considering leasing or buying a property, you need to know the difference between Rentable and Useable Square footage.
Usable Square Footage
The usable square footage of an office space represents how much space your firm will occupy. It includes the whole floor area within the walls of the space that you are leasing. This is the number that you’ll have to consider when deciding whether or not an office is adequately sized for your needs.
Rentable Square Footage
The rentable square footage includes the usable square footage and a percentage of the floor space with all shared areas in the building. Communal restrooms, stairwells, hallways, cafeterias, gyms, lobbies, and on-site property management offices can all be included in this number. Since lease agreements require tenants to help with the cost of maintaining shared areas, it’s actually the rentable square footage and not the usable square footage that is used to determine your rent.
The increase in the rentable space above your usable square footage can be called the “load factor,” “add-on factor,” or “common area factor.” This is usually between 10–15% but can be higher in some buildings. This is why when evaluating commercial real estate space, you need to be aware of the load factor so that you know what exactly you’re getting and at what price. Some buildings, may look to be a better value, but if they have a higher “load factor” you will be paying more for the useable square footage.
Why It Matters
Confusing usable and rentable square footage can lead to problems in the future. Tenants who mistakenly believe the rentable square footage is the same as their office space will find that they have much less room in their offices. Additionally, the rentable square footage is what determines your occupancy costs, so you’ll have to pay the most attention to this value during the negotiations.
In most office buildings, the space you’ll lease isn’t the space you will pay for. While you use your usable square footage, your lease is determined based on the rentable square footage. This can increase your total rent from 10 to 30 percent. While these charges are obligatory, understanding them can help you determine a realistic budget and also choose a better building to minimize the impact.
What Landlords Should Know
If you are a landlord, you will also need to know the rentable square feet, the usable square feet, and the load factor of the building.
You will probably market your building by using the rentable square feet rate, but it is a good idea to have both values available for a potential tenant so that they can fully understand what you are offering and so they do not feel deceived. Leasing a space using the rentable square feet will maximize your rate and ensure that you’re not wasting any space in your building.
Knowing the difference between Usable and Rentable Square Footage is a small but necessary step in understanding commercial real estate concepts that will help you maximize every opportunity and maximize your profitability through real estate.
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