Office tenants obviously prefer that the base rental is calculated with usable square footage instead of the rentable square footage. These two terms often cause confusion with some tenants. There are valid reasons why the lease requires a tenant to pay rent based upon relatable square feet.
But first, what is the difference between rentable and usable square footage? The usable square footage is the area of the space that is used directly by the tenant. It traditionally consists of the liner feet commencing at the center of the sheet rock wall to the edge of the glass at the window wall. In a nutshell it is the space within the walls of their leased space.
Calculate rentable square footage by multiplying the usable square footage by 1. plus the core factor. Derive the core factor is by calculating the common area of the building and making a ratio that will be used to determine the rentable square footage for the space.
So if the total square footage for a building is 100,000 square feet and the usable square footage is 85,000 square feet the way to calculate the core factor is as follows:
Total Building Square Footage: 100,000
Total Usable Square Footage: (85,000)
Building Common Area: 15,000
Core Factor 15,000/85,000 17.6%
With the core factor being calculated it is now easy for the landlord or tenant to calculate the rentable square feet. If you leased 1,000 usable square feet the rental square footage would be 1,176 square feet. (1,000 x 1.176 = 1,176). When all the usable square feet are lease and multiplied by 1. plus the core factor it will give the total building square footage.
Why Not Use Usable Square Footage?
Why would a tenant be expected to pay for any additional square feet? The ownership has to be reimbursed for the expenses associated with common area spaces used by the tenants. For example, the lobby and hallways have regular expenses that must be reimbursed by the buildings tenants. These expenses can include electricity, janitorial, construction and design, debt service, taxes and insurance. Obviously the landlord must recover these expenses and the way they do it is to include each tenant’s share of the common area in the square footage being calculated for the monthly base rent.
On the surface it may appear that the landlord is charging for more square footage than the tenant is using. In reality the tenant is paying for their space plus their share of the building’s common area.