When considering the cost of leasing space in a commercial building, there are three key factors to understanding how to get the best usable space, price, and amenities:
- Usable square footage
- Rentable square footage
- Load factor (also called common area factor or add-on factor)
Usable Square Footage vs. Rentable Square Footage
Simply put, usable square footage is the wall-to-wall floor space a tenant will occupy in order to do business. This does not include features like lobbies, shared restrooms, hallways, and storage closets. If a tenant occupies a full floor, the usable space will include any of these areas that are used exclusively by that floor.
Rentable square footage is the total usable square footage a business will occupy, plus a proportionate (sometimes referred to as pro-rata) amount of the shared communal spaces, like reception areas or kitchenettes that serve entire floors. Since these amenities benefit you and your business, you pay for a portion of them in your rent.
The load factor can tell you what proportion of a building is shared space, and therefore how much additional square footage will be factored into your rent each month. For example: a client is looking at two buildings, both with the same rental rate and 5,000 usable square footage. One building has a 15% (or 1.15) load factor, and one has a 20% (or 1.20) load factor.
In the first building, the rental rate will apply to 5,750 (5,000 x 1.15) square feet. In the second building, the rental rate will apply to 6,000 (5,000 x 1.20) square feet. The second building would cost more per month; however, the client may decide that the greater shared area, like maybe a fancier lobby or larger kitchenette, would be worth the expense.
A client will never be able to pay for usable space alone; communal spaces will always factor into the cost of the rentable area of a building. Understanding load factor can help a tenant make educated decisions about the space being rented and how to prioritize work space and general access to amenities against cost and rental rates.