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.

40 comments:

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    2. John's example, unfortunately, incorrectly calculates the load factor as 15%. In fact, the load factor is 1.17647, or 17.647%. If a single tenant took the 100,000SF space and added 15% to its 85,000SF (85,000 x 1.15(%) to arrive at its RSF, then the total square footage the tenant is paying for is only 97,750 SF. John should have taken the 85,000 and divided that into the total building square footage of 100,000 to arrive at the load factor. Load Factor = Usable Square footage divided by the building total square footage to arrive at the correct load factor. LF = USF/BTSF (where BTSF = building total square footage). Rentable Square Footage is calculated by dividing the Usable Square Footage by the Load Factor then adding it back to the Usable Square Footage. RSF = USF x LF + USF. 85,000 x .17647 = 15000 + 85,000 = 100,000

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    3. Matt Langenbach - you got the correct load factor but your formula is also wrong.

      Your formula:
      Usable SF (85k) ÷ Bldg Total SF (100k) = 0.85 Load factor. That's wrong.

      The correct formula is:
      Bldg Total SF (100k) ÷ Usable SF (85k) = 1.17647 Load factor.

      Delete
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  6. I believe what is calculated in the article is loss factor instead of load factor. And tenants would want a lower load factor rather than a higher one.

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  12. This article is incorrect. It describes the Loss Factor, which is different than the Load Factor.

    Load Factor - In a lease, the load factor is the multiplier to a tenant's useable space that accounts for the tenant's proportionate share of the common area (restrooms, elevator lobby, mechanical rooms, etc.). The load factor is usually expressed as a percentage and ranges from a low of 5% for a full tenant to as high as 15% for a multi-tenant floor. Subtracting one (1) from the quotient of the rentable area divided by the useable area yields the Load Factor. At times confused with the "loss factor" which is the total rentable are of the full floor less the useable area divided by the rentable area. (If a full floor broken up into multiple tenancies has a useable area of 18,000 s.f. and a rentable area of 20,000 s.f., the load factor is 11.1% and the loss factor is 10%.

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