Published October 27, 1995 in the DENVER BUSINESS JOURNAL
Study Before Setting Square Footage Needs
by Warren Kieding
WHERE DO YOU DRAW THE LINE lease space doesn’t come with a window sticker like your new car did. You’d have all those esoteric fees like tax, title and dealer prep spelled out for you in neat, line-item detail. You’d know what’s included and what you’d have to pay extra for. And you’d know it upfront, before making any decisions you might later regret.
in defining your square footage thought process? In an ever-tightening marketplace the options of delineating and purchasing lease space remain complicated and confusing, even to the principals.
Exploring the issue after the fact can cost you more than you think. Imagine buying your dream car over the telephone. An operator describes for you an available 1955 Mercedes-Benz 300SL gull-wing coupe, exactly what you'd hoped for. The operator quotes you a price. Ecstatic with your good fortune, you move swiftly to wire the down payment without checking the mileage or arranging for a test drive.
Okay, so this is a grossly oversimplified analogy, and this process, while convenient and most certainly expeditious, would leave much to be desired in the area of prudent purchasing. The fact is, however, in a downsizing--or "rightsizing"--business environment, the assessment of square footage measuring remains ill-defined, and misunderstood, two terms you do not want used when ultimately referring to your money.
Start by asking yourself some basic questions. How do I quantify my square footage requirements? How do I know what is included and what is not? If I'm a tenant, how do I know what I'm buying? If I'm a landlord, how do I know what I'm selling? The answer, of course, is in the numbers.
If you're a tenant, set your primary goal on determining how the amount of space you pay for is measured. Rents are determined at x dollars per square foot based upon what is called rentable square feet: the amount of square feet you occupy plus a portion of space you don't occupy but use with every other tenant in the building, like lobbies, rest rooms, janitors' closets, and hallways, for example.
You and your coworkers actually inhabit what is called usable square feet. It is measured from the center line of demising partitions--or the middle of the wall--to the tenant side of public corridors and the glass line or inside face of exterior walls, whichever exceeds 50% of vertical wall space. If you think of the wall as a backyard fence, and the glass line as the edge of a pond, your measurement splits the fence and extends to the edge of the pond.
Now, in order to determine rentable square footage--what you pay for--there is a rentable/usable (R/U) factor which typically ranges from 10% to 15% for most buildings. Here again, the calculation itself is simple: multiply usable square footage by the rentable/usable factor and you get total rentable square feet.
The critical aspect of these calculations is not the formula, but the standard of the measurement itself. Rentable square footage is the total enclosed floor area of a building including common areas all tenants use, except shafts: holes in the floor, like stairwells and elevators. Usable square footage includes only the area a tenant occupies. The rentable/usable factor is the ratio of total rentable square footage to total usable square footage.
Although Building Owners and Managers Association (BOMA) standards are the only ones recognized--and thus referred to--nationally, it is vital that you understand exactly what they entail, regardless of which side of the lease agreement you represent. Count on your broker to verify that these standards have, indeed, been used to calculate your rent and you will have a fair basis of comparison on which to evaluate space and lease options.
The key here is clear and qualified communication whether you're the tenant or the landlord. When considering square footage measurements, ask questions. Be aware of your options, and beware of the unknown, or unexplained. You wouldn't buy--or sell-- any high ticket item without first addressing every possible concern. Accord your space plans the same attention to meticulous square footage detail. It's simply good business.