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Office Space

How To Calculate Rentable Square Feet

By Jonathan Keyser
February 09, 2015

A proper evaluation of usable vs rentable square feet is the difference between a great or an awful commercial lease. Even if you know the difference, you can still get a bad deal through a miscalculation of the space.

To avoid this, you must understand the calculation method and enlist the help of an unbiased third-party professional. They will ensure no minor miscalculations occurred.

Because landlords often charge based on the square footage, you can end up with a much larger financial obligation due to a small error.

Usable vs. Rentable Square Footage

First, you must understand the difference between usable and rentable square footage calculations.

Usable square footage accounts for the areas you will occupy to conduct daily business. Office spaces, kitchen/break rooms and even a private restroom within your suite all make up the usable square footage.

Rentable square feet includes the usable space plus common areas of the building (e.g. hallways, lobbies and common restrooms). The price per rentable square foot includes a pro-rata calculation based on the size of your lease space.

Calculate Load Factor

Landlords calculate rentable square feet based on the load factor (aka, common area or add-on factor). They base this number on the percentage of common areas in the building.

To find the load factor, you’ll use a basic equation:

Building Rentable Square Feet ÷ Building Usable Square Feet = Load Factor

Let’s say a building’s total square footage equals 100,000. If 85,000 was usable square feet, then the building would have 15,000 square feet of common areas. So, the equation would look like this:

100,000 ÷ 85,000 = 1.15

Once you have the load factor, it’s time to determine the rentable square feet that you’ll contribute to. That equation looks like this:

Tenant Usable Square Feet x Load Factor = Tenant Rentable Square Feet

Why Should You Care?

Once you know this formula, you can evaluate which office space offers the best deal.

Suppose you narrowed it down to two 5,000 usable square foot offices. Each space had the same monthly rent, but one office had a 1.15 load factor and the other had a 1.25. Using the equation, you’d find:

5,000 x 1.15 = 5,750

5,000 x 1.25 = 6,250

The first building could only charge you for 5,750 sq ft of space. But the second building would charge rent for 6,250 sq ft. Ultimately, the first building would save you money.

Read the Lease & Do the Math

An accurate calculation could save your company thousands of dollars over the term of your lease. However, you might not always want to go with the smaller space. Perhaps the more expensive choice has better amenities that make the extra financial investment worth it.

But either way, you need to understand these calculations to make the most educated decision for your company.

Could you use some help along the commercial real estate journey? Our selfless team will happily assist you every step of the way. Contact Keyser today to discuss your needs.

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Jonathan Keyser

Jonathan Keyser is the Founder and Managing Partner of Keyser Commercial Real Estate(http://www.keyser.com/), which has become the largest commercial real estate firm of its kind in Arizona. Jonathan is also a Founding Partner of Exis Global, which today has over 580 people worldwide representing exclusively occupiers of commercial real estate. He is also the founder of a small investment fund that invests in emerging technology companies within Arizona, to support and help grow the startup ecosystem in the state. Jonathan was recently named "The Commercial Real Estate Disruptor" by USA Today and he is a #1 Wall Street Journal Best Selling Author, for his Best Selling Book, “You Don’t Have to be Ruthless to Win”. He has also been named a "Top Social Capital CEO" by the International Business Times, is a highly sought after keynote speaker, is widely recognized as a thought leader featured in hundreds of articles, publications, and podcasts, and has been named a "Top 20 Virtual Keynote Speaker" nationally. As an entrepreneur, Jonathan has built KEYSER into an eight-figure firm named recently as one of the Top 50 Most Trustworthy Companies in America by The Silicon Review. Jonathan is also one of the most connected business leaders in Arizona. He is an active member of Greater Phoenix Leadership (consisting of the region’s leading CEO’s), and he is also a member of Young Presidents Organization (YPO), Chief Executive Organization (ceo), and the Million Dollar Speaking Group (MDSG) within the National Speakers Association. With almost 30 years of experience in the Commercial Real Estate Industry, Jonathan’s firm represents occupiers of space exclusively, both domestically and internationally across a broad range of industries. Jonathan is sought out by companies around the world for his real estate expertise and business acumen. He is particularly good at identifying creative strategies to align real estate with business requirements, designing and implementing unique solutions to complex real estate challenges, and solving Landlord / Tenant conflicts where negotiations have deteriorated in the face of rising hostilities. Jonathan is happily married to his wife Susanna, and has 5 kids with one on the way. His mission is to change the business community through selfless service, and his entire firm is built upon this philosophy. Jonathan is known throughout the business community as someone who loves to help others, and who goes out of his way to be of service to people across the community.

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