Size matters when it comes to commercial office space. After all, you want to ensure that your team has enough room to comfortably move through their workdays but also don’t want to end up with tons of empty floor space. Plus, the size will determine how much you pay for your monthly rent. When you’re considering the cost of occupying a particular office, it’s important to understand that your lease will establish two different sizes: usable and rentable square footage. Understanding what these terms mean is vital to comparing various offices and negotiating a fair deal.
Usable Square Footage Defined
The usable square footage of an office tells you how much space your company will have to occupy. It includes all of the floor space within the walls of the area that you are leasing. This is the number that you’ll need to consider when deciding whether or not a particular office is ideally sized for your needs.
Calculating Usable Square Footage
Your usable square footage is the actual area of your space as measured within the demising exterior walls of your suite. If you have a 50 foot by 80-foot rectangular space, you would multiply the 50 feet of length by the 80 feet of width to come up with 4,000 usable square feet. In the event that you have a shape that has a more complex shape, you can use the methods that you learned in geography, or depend on the measurements provided by an architect, engineer or space planner.
Rentable Square Footage Defined
The rentable square footage of an office includes the usable square footage plus a percentage of the floor space of all shared areas in the building. Stairwells, communal restrooms, hallways, lobbies, cafeterias, gyms, and even on-site property management offices may be included in this calculation. As lease agreements require tenants to help pay for the cost of maintaining shared areas, it’s the rentable square footage, not the usable square footage, that is used to calculate your rent.
Calculating Rentable Square Footage
Your rentable square footage is equal to your usable square footage plus your pro-rata share of the common areas of the building. To calculate it, you need to know the building’s total rentable area and its total usable area. Imagine a 50,000 square foot building that has 42,000 usable square feet and 8,000 square feet of common area. If you had a 4,200 usable square foot space, you would find your pro-rata share by dividing 42,000 into 4,200 to find that you have 10 percent of the building. That is your pro-rata share. Then, you multiply the total common area (8,000 sf) by your pro-rata share of 10%. This gives you your share of the common area — 800 sf. 800 sf of the common area plus 4,200 sf of the usable area gives you a total rentable square footage of 5,000 sf.
Usually, though, you will get your rentable square footage from the landlord. Just be careful to make sure that it seems reasonable. (Your tenant rep, architect or space planner can help you judge this.)
Why It Matters
Confusing rentable and usable square footage can lead to problems down the line. Tenants who mistakenly think the rentable square footage refers to their office space will find themselves with much less room in their offices. In addition, the rentable square footage is what ultimately impacts your occupancy costs, so you’ll want to pay the most attention to this number during the negotiating process.
Managing Your Costs
Generally speaking, the extra space that you will pay for is fixed by the building. However, you can calculate each building’s load factor by dividing the total common area by the total usable square footage. Knowing that you can compare buildings on the basis of their efficiency. Typically, buildings with lavish public areas will have higher load factors, meaning that you pay more rent for space that isn’t technically yours. However, design quirks like large elevator lobbies, wide hallways, and oversized bathrooms or storage areas can also inflate the load factor. If you can find two roughly comparable buildings with different load factors, choosing the more efficient one will reduce your occupancy costs.
Rentable and Usable Square Footage Tips
Break Out Your Measuring Tape. While taking the time to measure an office yourself is time-consuming, it’s a good idea to do so. To calculate the usable square footage, you’ll want to measure the length and width of each room in the office as well as hallways and then add the numbers together. If your calculation differs greatly from the landlord’s, request to measure the space together.
Get the Details on Rentable Square Footage. A reputable landlord should be willing to make the equation used to calculate rentable square footage calculation as transparent as possible. You’ll want to double-check the following.
How was the percentage calculated? Typically, the percentage of the shared spaces that you’re responsible for should correspond to the percentage of the building that you will be occupying. Ask for the total square footage numbers and calculate this figure yourself.
What’s included in rentable square footage? Ask for a detailed list of everything that’s calculated in the rentable square footage. Be on the lookout for things like airshafts. In addition, some landlords may try to extend the measurements outside to include things like gargoyle facade ornaments to add costs.
Hire a Pro if Necessary. If you are questioning the accuracy of your landlord’s numbers, consider hiring an architect to conduct the measurements for you. The amount of money that you could save over a long-term lease could more than cover his or her fee.
When it comes to most office buildings, the space you lease isn’t the space you pay for. While you occupy your usable square footage, your lease is calculated based on your rentable square footage. This increases your total bill by anywhere from 10 to 30 percent. While these charges are unavoidable, understanding them can help you both set a realistic budget and potentially choose a more efficiently built building to minimize their impact.
Originally published on March 11, 2020 by our good friends and colleagues at iOptimizeRealty. The original post can be found HERE.