A common misconception is that real estate is the same whether you are leasing an office space or renting a home. Some basic terms can be applied to both types of real estate, however there are many differences to be aware of when introduced to the world of commercial office space.
One that we’d like to break down here is how square footage is measured. Commercial space is much different than residential space in the way square footage is measured and what the occupier would pay per square foot. It can get confusing on what the tenant (that’s you!) is actually renting. To commoditize commercial space, buildings often advertise in a dollar amount per square foot. The building then charges each tenant by how much space in the building they occupy based on the total space of the building. A common misconception is that a tenant can measure the size of their suite, and then calculate how much their monthly rent is going to be.
This approach would use this calculation: Cost = Rate/SF * Measured SF
Why isn’t that possible?
For that answer we need to break down two terms: Usable Square Footage and Rentable Square Footage. Tenants measuring space in their private suite are measuring a rough estimate of the Usable Square Footage and rental rates are determined off of Rentable Square Footage.
What is the difference between Usable and Rentable Square Footage?
Usable Square Footage, in the most basic sense, is the amount of square footage in the private space of the tenant. In theory, that would make the tenant’s measurements correct when they measure the space they plan on renting. The difference comes from the way landlords measure.
Landlords measure Usable Square Footage (USF) on a set of standards put in place by the Building Owners and Managers Association (or BOMA). This set of guidelines allows for owners to measure halfway into common walls and up to the dominant part of the external walls and columns are not taken out when determining the Usable Square Footage. There are many other factors that change the actual USF. Overall, measuring square footage to determine the Usable Square Footage is tricky and can often be misleading.
Even after determining Usable Square Footage, ultimately it is not what is used to determine rent. Rentable Square Footage (RSF) is what landlords advertise and what applies to the the rate/sf. Not all sections of a building are divided into suites. Common areas such as hallways, stairs, conference rooms, or elevator lobbies are spaces that benefit the tenants of a building indirectly. These areas factor into the usable square footage by multiplying the USF by a proportional share of the total building square footage. This proportional share is a percentage that is commonly referred to as the “load factor”. RSF includes a pro-rata share of the common areas that a tenant pays for which is always larger than USF.
When evaluating options in the market the difference between Usable and Rentable square feet can have a significant financial impact on a rental budget. For more information on how to calculate USF, RSF, or load factors of a specific property contact an expert on the subject or a local TenantBase Advisor.