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The world of commercial real estate has its own (often confusing) language, there are certain terms, like usable vs rentable square feet that you need to understand in order to be a more informed renter. At first glance, usable and rentable square feet may seem like the same thing, but there are some key differences that you should know.
Understanding usable vs rentable square feet
Being able to make sense of usable vs rentable square feet is vital for knowing how much space you are really going to get when you rent an office for your company. Knowing the difference between the two will also help you ensure that you are getting the best possible deal on an office space and that you have an accurate idea of how much space you will be getting.
What is usable square feet?
The usable square footage in an office refers to the space that will be used exclusively by your company. Obviously this includes all of the office area that would be available for your business and employees to work. This is where your desks, office furniture, equipment, private offices, meeting rooms, etc. will be. Also included in the usable amount are any spaces such as storage rooms, restrooms, or break rooms that are designated specifically for your company.
Whether certain types of spaces are counted as usable might depend on whether or not a company has an entire floor to itself. If it does, a space like an electrical room or a janitor’s closet might also be considered usable space if their use is dedicated for that floor.
The term “usable” is not completely accurate, though, given that the square footage occupied by columns, for instance, is also technically considered usable square feet. This also applies to recessed entries and similar spaces that might be useless in a practical sense. When you are examining an office space in person, you may want to take note of areas like this and subtract them from the usable square feet figure you are given.
What is rentable square feet?
Rentable square footage, which is the amount that your total rent will be based on, includes all of the usable square footage plus a percentage of the common areas in a building. Common areas can include lobbies, hallways, restrooms that are open to all, conference rooms, and other spaces that can be shared amongst the different tenants in the building.
How can the building owner possibly predict how much each company on a floor or in a building will utilize the common areas? They can’t. The fact is, some businesses may utilize them more than others, but that is irrelevant because it is figured as a pro rata share. That is to say, the renter will pay for the common spaces in proportion to the amount of usable office space that they are leasing.
Determining the load factor
So how do you actually calculate the rentable square feet? Property owners use a load factor (also known as a common area factor) to figure rentable square feet for individual tenants.
You get the load factor when you divide the rentable square feet of the entire building by its usable square feet. So, for example, if a building has 50,000 rentable square feet and 40,000 usable square feet, the load factor is 1.25.
Now, to calculate the rentable square feet for an individual tenant in that building, you take the usable square feet (for example, let’s say this tenant has 10,000 usable square feet) and multiply it by the load factor of 1.25. The result is 12,500 rentable square feet for that tenant.
Some space is not considered rentable or usable
While the rentable square feet encompasses the vast majority of the building, there are a few exceptions. For instance, elevator shafts, stairwells, parking lots, and parts of the building used for its general operation will be included in the gross square footage of the building, but not count towards rentable square feet.
Assessing the square footage offered
When you are searching for a new office space, you want to be very clear on whether you are looking at usable vs rentable square feet figures. Having both is ideal, as it will give you a better picture of how much space your business will have for its own use, and how much common space will be available to you.
It’s best not to make any decisions based solely on the rentable square footage, since you could end up being unpleasantly surprised to find that a smaller-than-expected percentage of that is actually usable square feet exclusively for your company.
Likewise, you won’t want to make your determination on what space to rent with only the usable square feet figure available, since that is incomplete. For instance, if you were told that there was a 5,000 square feet office space available at a rental rate of $XX.XX per square foot, that would be misleading because the total rent will not be based on usable square feet – it will be based on the rentable square feet figure.
If a broker or landlord has not supplied you with the rentable square feet, but can give you the load factor, you can calculate the rentable amount yourself using the formula mentioned above: usable square feet x load factor = rentable square feet.
Usable vs rentable square feet demystified
Now you have a little extra insight into commercial real estate and how those square footage figures you see in office space listings are actually calculated. Ideally, when you are looking for a new office, you will be working with a commercial real estate broker who will be able to walk you through issues like this, but it is always smart to be informed and aware. Also note that if you see the abbreviation USF, that stands for usable square feet, and the abbreviation RSF stands for rentable square feet.