The Differences Between Usable And Rentable Square Footage

Navigating the intricacies of commercial real estate requires a firm grasp of how space is quantified, particularly when distinguishing between usable and rentable square footage. This subtle yet important difference impacts everything from total rent to space planning, shaping the value you receive for your investment in office space.

What Is Usable Square Footage?

Usable square footage is the space you can use for your business. Think of it as the area inside your office or store where you can put desks, shelves, and personal items.

It's measured from one wall to another, within the walls where only you work or sell your products. This kind of space doesn't include areas like hallways, bathrooms, and elevator lobbies that everyone in the building shares.

Knowing how much usable space there is helps professionals understand what they’re paying for. Remember this simple rule: if it’s within your perimeter walls and not a shared spot with others, then it goes into counting up those usable square footage numbers.

What Is Rentable Square Footage?

Rentable square footage includes the private area you use and a part of the building's shared spaces. It covers your slice of common areas like meeting rooms, fitness centers, or even patios.

This number matters because it’s what landlords use to set your rent. When you look at lease agreements for tenant space, what you pay monthly isn't just for where your computer is — it also includes these extra shared spots.

Property management teams often calculate this as a percentage added to your exclusive space — showing how much floor area falls under your lease. The size and value of these amenities can make a difference in choosing one location over another as they are part-and-parcel with leasable square footage.

Components Of Usable And Rentable Square Footage

Understanding the components of usable square footage is important to determine the actual square footage for business purposes of the leased area. The components of usable square footage in commercial leases include:

  • Occupancy Area: The occupancy area comprises the exclusively usable area within a commercial property allocated to the tenants for their business operations.
  • Common Use Areas: Common use areas include hallways, lobbies, restrooms, and other areas that are shared by tenants and are available for free common use.
  • Columns, Walls, and Obstructions: Columns, walls, and other structural obstructions are included in rentable and usable space. These features can impact the operation and utilization of commercial space and drive up the cost of commercial rental space.
  • Building Standards: Building standards include fixtures, electrical wiring, ventilation, ceilings, lighting, and other features that impact tenant comfort and practical use of leased commercial space.

On the other hand, rentable square footage components include:

  • Usable Area: The usable area comprises the commercial space rented by the tenants for their exclusive use.
  • Common Area: Common areas may include lobbies, hallways, restrooms, and elevators. The landlord allocates the cost of using the common areas to the tenants based on the relative benefit they derive from the areas.
  • Load Factor: The load factor indicates how much of a building's space you can use compared to what you pay for. It provides information about the size of common areas, such as lobbies, toilets, and corridors, that all tenants share. A higher occupancy factor means that a larger portion of your rent is used for common areas rather than the private area where you work.
  • Building Add-Ons: Building add-ons can include external areas of a property, such as storage units and covered parking lots, which aren't directly attributed to the leased commercial space.

The Difference In Cost Between Rentable And Usable Square Footage

The cost per square foot is generally higher for rentable square footage than for usable square footage because it includes space charged to tenants that they don't necessarily need or use. Usable square footage is more cost-efficient because only the space a tenant needs for their business is included in the calculation.

Owners calculate the rentable square footage by adding the usable and common areas and then dividing them proportionally. Property owners then adjust for a pro-rata value, which is influenced by factors such as the length of occupancy, which typically ranges from 1% to 11% of the control of the lease, and multiply it by the stated rent per square meter to arrive at the tenant's rental rate.

Tips For Assessing Square Footage

By following certain tips, tenants can ensure they’re leasing the right space for their operations while avoiding costly leasing mistakes and unnecessary expenses.

Engage Professional Measurement Services

Hiring a professional surveying service is the best way to ensure accuracy when assessing square footage. These professionals have the necessary expertise to calculate square footage accurately and can use modern technologies such as laser measurements or digital building plans.

Therefore, Engaging their services increases the likelihood of obtaining error-free square footage figures that accurately reflect the rented square feet.

Verify Measurements

When valuing commercial property, it's important to familiarize yourself with how to measure square footage. Simple tools such as tape or laser measuring devices can help determine the square footage correctly.

Building obstructions such as walls, columns, or archways that aren’t accounted for can significantly affect the square footage measurement. Tenants should make sure there are no obstructions and then request an appropriate adjustment to the square footage of the lease. This adjustment is necessary to ensure that the tenant is paying for the actual square footage of the leased space and to avoid any misunderstandings with the lease.

Tenants must also be informed of the measurements used to determine the floor area. This includes clear guidelines on what should and should not be measured. For example, when measuring the floor area, the area along columns, walls, and public areas should generally be included in the rentable square footage but not in the square footage the tenant can use.

Check The Lease Agreement

The lack of this information can lead to disagreements and disputes between tenants and landlords, especially during the lease term. The lease should contain all information about the leased space, including the total area leased, the rentable and usable space, the rental rates, and other relevant lease terms.

However, tenants should ask the landlord or management for clarification if this information isn’t included in the lease. This will clarify the misunderstanding between the parties and ensure that the lease is consistent with the tenant’s operational capabilities. Disagreements resolved at this early stage of the lease process minimize the possibility of disputes during the lease term and assure the tenant of more predictable lease terms and payments.

The lease should detail the property layout and square footage measurement, including the components of rentable square footage and the agreed profit margin, among other considerations that the tenant and landlord should agree upon.

Common Mistakes To Avoid When Calculating Square Footage

Accurately measuring square footage ensures tenants pay only for the right amount of leased commercial space. Avoiding these common mistakes when calculating square footage measurements is important in ensuring optimal lease agreements.

Using Incorrect Measurements

Inaccurate measurements can lead to overpayment for rented space or difficulties with the actual size of the rented space. Tenants need to take the necessary steps to ensure accurate calculations. One way to do this is to use a professional surveying company or architectural firm to ensure accurate measurements.

If you plan to take measurements yourself, make sure only to include the rented space and exclude common areas, garages, and storage rooms that aren’t included in the lease. This approach ensures accurate cost projections and effective use of the leased space for the tenant's business operations.

Using Outdated Information

Due to the dynamic nature of commercial real estate, changes in building structure, building operation, legislation, and safety regulations can cause older floor plans to become obsolete or irrelevant, leading to discrepancies in the rentable area calculation.

Building structure changes can affect commercial space measurement, leading to discrepancies between the actual rentable area and the floor plan. This can lead to unexpected changes in the cost projections and estimates of the lease, including additional costs resulting from the changes in the building structure.

Building codes and regulations vary by region and may require different commercial real estate valuation standards. These changes can lead to discrepancies in calculating the square footage of leased commercial space. Such discrepancies can lead to disagreements between landlords and tenants or between tenants themselves, causing unexpected costs and delays.

To avoid these problems, tenants should request updated floor plans when structural changes are made. Landlords should inform tenants of these changes in detail and ensure that these changes are correctly reflected in the lease terms.

Find Your Ideal Commercial Space Today

With years of experience in commercial leasing, Jasper Realty Advisors provides insight and guidance throughout the leasing process, including lease negotiation, renewal, relocation, and termination. As experts in commercial space square footage calculations, we assist commercial tenants in evaluating and optimizing the square footage of their leased space to ensure cost efficiency and optimal lease terms.

If you’re a commercial tenant looking for professional advice and expertise in lease negotiations, visit our website or click here to contact one of our leasing experts, who can answer any questions you may have and provide appropriate support throughout the process.