When searching for a rental property, whether it be for commercial or residential use, understanding “rentable square footage” is crucial for making an informed decision. This term can significantly impact the cost and value of the space you’re leasing, affecting both your short-term expenses and long-term financial planning. In this article, we’ll explore what rentable square footage is, how it’s calculated, and why it matters for tenants.
What Is Rentable Square Footage?
Rentable square footage refers to the total amount of space in a rental property that can be leased by the tenant. This includes not only the space within the walls of the leased unit (called “usable square footage”) but also a share of the common areas, such as hallways, lobbies, elevators, and restrooms, that tenants use collectively. In commercial properties, for instance, the rentable square footage might include a proportion of shared amenities or building infrastructure that is factored into the rent.
The key difference between rentable and usable square footage lies in this shared space. Rentable square footage accounts for the portion of these common areas that tenants are effectively “renting,” while usable square footage pertains strictly to the private, occupied space.
How Rentable Square Footage Is Calculated
Rentable square footage is typically calculated by taking the total area within the walls of the building, then adding a percentage of the shared spaces. This process varies slightly depending on the type of property and the method used by landlords, but generally, the formula is as follows:
- Measure the usable square footage: This is the floor area that the tenant directly occupies. It excludes walls, columns, and other non-usable spaces.
- Add the common areas: For office buildings or other commercial spaces, landlords allocate a portion of the common areas (such as staircases, restrooms, or corridors) to each tenant based on the percentage of the building they are renting.
- Multiply by a load factor: The “load factor” is the ratio that calculates the shared space allocation for each tenant. This number varies by building and can influence the overall cost of rent.
For example, if the usable square footage of your office is 1,000 square feet, but the building has a 20% load factor, your rentable square footage will be 1,200 square feet. This means you will be paying rent on 1,200 square feet, even though you only physically occupy 1,000 square feet.
Why Rentable Square Footage Matters
1. Cost Implications
One of the most important reasons to understand rentable square footage is that it directly impacts your rent. Rent is typically charged per square foot of rentable space, not usable space. As such, knowing the difference between these two can help you estimate the full cost of leasing the property. If you’re not factoring in the common areas, you might underestimate the overall price of the space.
For instance, a building with a high load factor means that tenants will be paying more for common areas, which can result in a higher overall rent compared to buildings with lower load factors. Being aware of how rentable square footage is calculated will allow you to compare rental costs more accurately across different properties.
2. Space Utilization
Rentable square footage can also give you a clearer idea of how much space you’re actually getting for your money. While it’s easy to focus on the usable square footage when deciding if a space is suitable for your needs, the rentable square footage includes other factors that contribute to the overall experience of the space, like access to building amenities. This can be particularly important in commercial real estate where shared spaces such as reception areas and conference rooms are often used.
3. Negotiation Power
Understanding the concept of rentable square footage can also strengthen your position when negotiating lease terms. If you’re aware that a building has a high load factor, you may choose to negotiate a reduction in rent or seek clarification on which spaces are included in the calculation of rentable square footage. Having this knowledge can help you avoid hidden costs and ensure that the lease terms are fair and transparent.
Conclusion
In conclusion, understanding rentable square footage is crucial when evaluating potential rental properties. It helps tenants comprehend the full scope of space they are leasing and avoid unexpected costs. Whether you’re leasing an office, retail space, or residential unit, ensure that you are factoring in the rentable square footage and its impact on your rental expenses. By gaining a deeper understanding of this concept, you’ll be better equipped to choose the right space and negotiate more favorable lease terms.
