Many new office tenants are confused by the terms relatable square footage and usable square footage. They sometime don’t understand why the rental rate is based upon rentable square footage. A few tenants may think that the landlord is taking advantage of them but in fact they are not.
Why Is An Office Lease Based Upon Rentable Square Feet?
Lets make some assumptions so I can explain the concept. A building has four floor plates that consist of 25,000 square feet on each floor. Imagine that you are looking at the unfinished floor and you see a 25,000 square foot concrete slab. Each floor of the building has the exact same look including the first floor.
Now Imagine that you are a hotshot company executive and you lease 11,000 useable square feet on fourth floor. There will be common area bathrooms shared with another tenant and common corridors that you both will use to gain access to your offices but this square footage isn’t included in your usable square feet.
The first floor has been finished with a first class lobby and a guard station. Plus it has a mail room, common conference room, and restrooms. These amenities are shared by all the tenants in the building.
So, when you signed you lease you leased 11,000 square feet of office space within the walls of your suite. Why would you pay for more than the space within your four walls? Well, remember the beautiful lobby you walk through as you said good morning to courtesy officer Jim? As you stepped off the elevator and walked down the corridor to your suite and spilt your coffee on the carpet after you moved quickly so you wouldn’t have to talk to your annoying neighbor.
In addition to the space within your walls the landlord has to maintain and operate the corridors, restrooms, security desk, lobby and common conference room plus pay for the construction of those spaces. They have to receive income for these necessary building features and they do this by placing a core factor on your usable square footage.
The way this is done is the Landlord will hire an architect to measure the common areas, lobby, hallways , bathrooms and other features that are accessible to all tenants. Once this number is obtained the will divide it by the total square footage of the building’s floor plates and determine the core factor and the rentable square feet of the building.
In our example, we have four floors that consist of 25,000 square feet each. The entire building is 100,000 square feet. Lets assume that the total square footage of the bathrooms, lobby and hallways is 15,000 square feet. Our core factor is 15% 15,000/100,000. The core factor will now be multiplied into your usable square footage of 11,000 square feet 11,000 x 1.15 = 12,650. So the rentable square feet on your space is 12,650.
In most cases the landlord will base the monthly rental paid by the tenant on the rentable square footage. So in this example if your base rent is $12.00 per rentable foot the monthly rent is $12,650.
I have seen many new business owners confused by the concept of rentable square feet and usable square feet when they lease office space. I hope that this simplified explanation helps to make the concept easier to understand.
There are several standards used by architects in their measurements to determine a core factor. Generally the most accepted standard is the BOMA office standard. If you want to get into the details of measurement standards BOMA has several good publications