Many business owners don’t understand the fact that they pay for more space than they occupy. Landlords use a common area load factor formula that evaluates what you’ll pay.
Essentially, this formula factors in the space you use on a daily basis (usable square footage) and the common areas around the building (like lobbies, elevator shafts, hallways, stairways, and common restrooms).
Once you understand this calculation, you can better evaluate your choices and come to the best decision during your office space search.
Understand Usable Square Footage
Basically, the space your company occupies on a daily basis qualifies as your usable square footage. It generally includes office spaces, break rooms and storage areas.
But landlords also charge you for a percentage of the building’s common areas based on the amount of space you lease.
Account for Common Areas
Small and large tenants both pay a percentage of rent toward a percentage of the building’s shared areas. You can divide common areas into two basic categories
- Floor Common Area
- Building Common Area
Floor common areas include shared spaces on a specific floor. It includes meeting spaces, restrooms and hallways. You’ll typically pay for about 8% of the floor’s common space.
Building common areas encompass the entire space. It includes lobbies, stairwells and elevator areas. You’ll pay from 6-8% for your share.
Your lease will likely include both floor and building common areas. That means, depending on the size of the space you lease, you could pay as high as an additional 20% due to the common area load factor of the building.
Calculate Rentable Square Footage
Ultimately, your rentable square footage is the total you’ll pay for the space. It includes the usable square feet plus the common areas.
You can determine how much you’ll pay through a common area load factor equation. Calculate it by dividing the building’s rentable square feet by the building’s usable square feet:
Building Rentable Square Feet ÷ Building Usable Square Feet = Load Factor
Now, to get the rentable square feet for your space, take the usable square footage and multiply it by the load factor:
Usable Square Feet x Load Factor = Rentable Square Feet
Once you understand the total costs, you can best evaluate several office spaces and find the best deal. The common area load factor helps you calculate and get a well aimed estimate on the true cost of renting. If you feel nervous about accurate measurements, don’t hesitate to hire an unbiased, third-party professional to measure the space.
If you need help finding, negotiating and closing the best lease for your business, contact us today. The world-class team at Keyser knows how to land you in the perfect office space.
