Understanding Rentable Area in Commercial Real Estate
What is Rentable Area?
Rentable Area is the total square footage that a tenant can be charged for in a commercial property. This includes the net leasable area (NLA) plus an apportioned share of the building’s common areas, such as lobbies, corridors, stairwells, and restrooms.
Rentable vs. Usable Area
Usable Area refers to the space that the tenant can actually use for their business activities. In comparison, Rentable Area includes both the usable area and shared common areas. Therefore, Rentable Area is always larger than Usable Area. Here’s a simple formula to differentiate:
- Usable Area + Apportioned Common Areas = Rentable Area
Calculation Examples
To make it practical, let’s dive into some examples.
Example 1: Small Office Suite
Suppose you are leasing an office suite with a Usable Area of 1,200 square feet. The building has 20,000 square feet of Usable Area and 4,000 square feet of Common Areas, giving a Total Building Area of 24,000 square feet. Here’s how to calculate:
- Building Common Area Load Factor = Total Building Area / Usable Building Area = 24,000 / 20,000 = 1.2
- Tenant’s Rentable Area = Tenant’s Usable Area × Load Factor
= 1,200 square feet × 1.2
= 1,440 square feet
Example 2: Large Office Space
Imagine you are leasing a larger corporate office occupying 5,000 square feet of Usable Area in a 100,000 square foot building. If the building has 20,000 square feet of Common Areas, your rentable area would be calculated as follows:
- Building Load Factor = 100,000 / 80,000 (Net Leasable Area) = 1.25
(Notice 80,000 is after removing the 20,000 Common Areas). - Tenant’s Rentable Area = 5,000 × 1.25
=6,250 square feet
Importance of Rentable Area for Tenants and Landlords
Understanding Rentable Area is crucial for both tenants and landlords. For tenants, it defines how much space they are paying for, affecting budget and space planning. For landlords, accurate calculation ensures fair distribution of common area costs among tenants, optimizing the building’s revenue.
Frequently Asked Questions (FAQs)
Q: Is the rentable area always larger than the usable area?
A: Yes, the rentable area includes the usable area plus the tenant’s pro-rata share of common areas, thus making it larger.
Q: How often is the building load factor reassessed?
A: Typically, the building load factor is reassessed whenever there are significant changes in the building’s common areas or total space.
Q: Can the load factor vary within the same building?
A: Yes, in some cases, different areas or floors within the same building can have varying load factors, depending on the availability and distribution of common areas.
Conclusion
Understanding Rentable Area versus Usable Area is essential for anyone involved in managing or leasing commercial real estate. Precise knowledge can help in making informed decisions related to leasing costs, space planning, and overall tenant satisfaction.
Additional Resources
- Commercial Real Estate Leasing Strategies
- Maximizing Office Space Efficiency
- Negotiating Lease Terms and Conditions
Related Terms: Net Leasable Area, Usable Area, Common Areas, Building Load Factor.
