Published August 2, 2000 in the COLORADO REAL ESTATE JOURNAL
Square Footage Deceives the Eye?
by Warren Kieding
THREE OF THE MOST IMPORTANT TERMS in leasing office space today are usable square footage, rentable square footage, and common area factor. Together, they determine the amount of your monthly rent check. Unfortunately, these terms might also be the most misunderstood in commercial real estate. It's not sexy, but getting to the root of what they are, and what they mean plays heavily on the bottom line of interior space.
Useable Square Footage
In general, usable square footage is the space you and your coworkers actually inhabit. For smaller tenants, useable square footage is simply the area of the demised suite-your office--with no exclusions for recess entry/exit doors or structural columns. What that means in essence, is that the space is measured as if columns are not there. But restrooms and janitor closets, elevator lobbies and public corridors are there, and you pay a portion of the space they occupy with the other tenants who use them.
For full floor or multi-floor tenants, useable square footage is everything inside the glass line, including restrooms, janitor closets or mechanical and electrical rooms. Like small tenants, full-floor or multi-floor tenants also must pay a share of the building common areas not on their floor, such as the main building lobby.
How much do you need?
If you want to estimate how much useable square feet your operation may require, there is a basic formula to follow: add up the total of the net size of all of your offices, open workstations and any other rooms within the space, then multiply that figure by 1.4. The 1.4 represents a 40% add-on for circulation, or shared space within the office, like corridors, and aisleways, for example. If you're a full-floor tenant add another five to eight percent for restrooms etc. to determine what size floor you really need. It's pretty straightforward.
For example, a 10 x 12-foot office equals 120 net square feet. Multiply that by a circulation factor of 1.4 and the result is 168 usable square feet.
The Common Area Factor
The common area factor is a number which refers to shared spaces on a single floor, and within a building in its entirety. These spaces as previously mentioned can be a pro-rata share of tenant common areas such as restrooms and elevator lobbies, or main building lobbies and amenities which all tenants of the building use.
The Floor Common Factor refers to tenant common areas on that floor only, and although the number varies from building to building, it is generally near eight percent of the floor for a factor of 1.08.
The Building Common Factor refers to common areas for all the tenants in the building, and can range from six to eight percent. Common area factors determine the actual square footage for which a tenant will pay rent.
Rentable Square Footage
Simply stated, rentable square footage is the area of the enclosed interior space of the building other than holes in the floor, such as stairwells, and elevator and mechanical duct space. If it's floor that you can stand on, you pay for it, because it is rentable space. That includes restrooms, janitor closets, electrical and telephone rooms, etc. What you pay for then-your rent--is the rentable square footage times the lease rate per square foot.
To calculate rentable square footage for a small (less than full-floor) tenant, first multiply the usable square footage by the floor common factor, then multiply that result by the building common factor.
Similarly, a full- or multi-floor tenant would multiply its full-floor usable by the building common factor because of the extra shared amenities and lobby space. So, that 10 x 12-foot, 120 square foot office which has since grown from 168 usable square feet to 181 rentable square feet must also be multiplied by let's say another 1.08 (between 6 and 10 percent) building common factor. The result is 195 rentable square feet.
The Bottom Line
The numbers can be confusing, but should not be overwhelming. First, don't underestimate just how much space you, as the tenant may need to rent. In our simplified example, we illustrated how a 120 square foot office grew to 195 rentable square feet after three layers of circulation and common factors.
Second, all offices leases should contain specific definitions as to how the rentable square footage is determined. The current BOMA (Building Owners and Managers) standard is the most widely accepted, but more than a few tenants have gotten sticker shock because their leases lacked clarity about what was being measured, and what was being paid for. Even a few missed square feet here and there over a five or ten-year lease could mean tens of thousands of dollars spent literally on nothing.