In response to my post “How a bad lease can bankrupt your small business.” I got an email from Jewell in Orange County, CA. She asked:
“What do you do to verify the difference between rentable and usable square feet? We have had many answers about how it was arrived at…the usable sq ft is 841 and the rentable sq ft is 1067. I would love to have some tips on how to verify the difference.”
In my twenty plus years in commercial real estate, I have had as many explanations from owners for arriving at building measurements as there are buildings, it seems. Miraculously, when some buildings were sold, they were one size with Owner A, and the next day, Owner B would re-measure the building and it was significantly larger! We jokingly called this “rubber ruler” measurements. However, there are some conventional standards for building measurement which will point you in the right direction.
The most common industry standard for measuring building is published by BOMA, (the Building Owners and Managers Association) and they publish a whole book on the subject, but these standards are sometimes ignored, or poetic license is taken with the interpretation.
Short of actually getting a scale drawing of the building and measuring the usable square footage, or getting a certification from an architect who did a field measurement of the building, there is no way to truly verify if an owner’s representation is accurate. Realistically, small tenants don't have a lot of leverage in negotiating this; you most likely will just have to accept it.
But, it is good to understand the concept of building measurements to be an informed tenant. In general, office space is measured in what is known as Rentable Square Feet (RSF), which is made up of two components: the usable area and your pro rata (proportionate) share of all common areas in the building.
The usable area or Usable Square Feet (USF) is the floor area where you can actually lay carpet and place furniture within your space; it is also known as the carpetable area. In addition to the usable area, office space is allocated a proportionate share of all the common elements of the building, which must exist for the building to operate. These common areas can include the main lobby, bathrooms, mechanical floors, garage lobbies and sometimes other common areas. Ask the owner what is specifically included in the common area of the building you are contemplating. Common areas vary widely from building to building. The USF, plus the proportionate share of the common areas make up the RSF.
Proportionate share defines the ratio of your space to the building as a whole. For example, a 10,000 square foot tenant in a 100,000 square foot building has a proportionate share of 10%. This is important to know because expenses for the building are allocated on this proportionate share, but that’s another post topic.
The ratio between what is rentable and what is usable is called the loss factor. When comparing buildings, you should know what “Loss Factor” is being used. Sometimes this is quoted as the "Add on Factor", and this is just the reciprocal of the Loss Factor. Simply put, a high loss factor building is less efficient than a low loss factor building.
For example, if you need 3,000 square feet of office space and you are comparing two different buildings, Building A with a loss factor of 25% and Building B with a loss factor or 15%, Building B is a better choice since you have more carpetable area. In mathematical terms, building A has 2,250 square feet of usable space and building B has 2,550 usable square feet. If the rent per rentable square foot is the same in both buildings, you are getting 300 free square feet in building B.
If you know the usable square feet, and the rentable square feet, you can calculate the loss factor by using the following formula.
RSF minus USF divided by RSF equals Loss Factor
If you are not sure the usable square footage quoted is accurate, and you really want to know for sure, there are some ways you can check it for yourself. If you are hiring a space planner, they will always measure the space before they make your layout plans. If you are not contemplating hiring a space planner, sometimes you can have a furniture supplier measure the space if you are serious about the space and are planning on purchasing new furniture. If you are going to install wall-to-wall carpeting in your space, then the carpet/flooring company can sometimes do it for you. But you can also do it yourself. It’s a bit tricky but not impossible.
First you should ask the owner or owner’s representative for a scale drawing of the space you are contemplating and use that to calculate the measurement of each room. If there is no scale floor plan, take a co-worker and measure each room manually. It’s not as difficult as you may think, just a little time consuming, but I would reserve this for my final selection for verification; I don’t think you want to be measuring every building you look at. This may be a worthwhile exercise for other reasons as well, such as furniture placement. To determine your USF, measure the area of each room (length times width); add the area of any corridors, reception areas, kitchens, copy rooms and conference rooms within your space, not in any common areas, then add the areas together and compare it to the RSF stated by the owner. Plug the numbers into the formula above and you will know the loss factor and how efficient the space is.
For more information on the technical aspects of leasing space, calculating expenses and negotiating commercial leases, you can check out our Leasing Guide on MySquareFeet.
Other sources of information on this subject can be found at:
NYTimes: The square foot numbers game
Boston Business Journal: How big is a square foot? It all depends on your audience.
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Posted by: Paper Shredders | October 24, 2008 at 11:07 PM