## Monday, June 13, 2011

### Rentable v. Usable: Load Factor

Most office buildings have a load factor. This load factor is a percentage that describes the difference between the rentable and useable square footages for the building. The usable square footage of a building is all the square footage behind the front doors of the tenant’s suite; the space that is exclusive to them. The rentable square footage is the usable square footage plus the common areas. The common areas include the hallways, lobbies, elevators, stairwells and restrooms of the building. These areas are not exclusive to any one tenant, but are for the use all the tenants and their guests.

Let’s say the gross square footage of an office building is 100,000 square feet. The gross square footage of the building is everything contained within the exterior walls. Let’s say that the total square footage of the common areas of the building is 15,000 square feet. This leaves 85,000 sq.ft. of usable space (i.e. suites).

To calculate the load factor we take the total square footage of the common areas, (15,000 sq.ft.) and divide it by the gross square footage of the building, (100,000 sq.ft.). The formula looks like this:

15,000/100,000 = .15. Therefore, the load factor of the building is 15%.

Let’s see how the load factor relates to leasing space within the building. Let’s say that a tenant plans on leasing a suite with 1,200 square feet of usable space. Knowing that the load factor of the building is 15%, the tenant could then calculate the rentable square footage of the suite (1,200 + 15% = 1,380 sq.ft.). So if the monthly rent for the suite is \$2.00 per square foot, the tenant’s total monthly rent would be \$2,760.00:

(1,380 rentable sq.ft. x \$2.00 per sq.ft.= \$2,760.00).

The rentable square footage is always higher than the usable square footage because it includes both the tenant’s suite and their percentage of the common areas.

When shopping for space, it’s important for tenants to understand and compare the load factors of the buildings they may be interested in. Higher load factors mean that more of a tenant’s monthly rent will be dedicated to common areas and less to the suite they occupy. That being said, buildings with higher load factors often have amenities, such as spacious lobbies or atriums, which many tenants may find appealing.