Nov 04, 2015

How You Pay for "Your" Common Area

By Don Catalano




There is more to your office than just your office. Picture a nice 40 by 80 foot space on the fifth floor of a mid-rise building. Now, answer these questions:

  • How would you get to work if there weren't elevators and lobbies? (and if you weren't Spiderman)

  • Where would your employees go to the restroom if you didn't have them built into your suite?

  • How could you hold large meetings if you couldn't use the building's large shared conference room on the second floor?

  • What would visiting clients or potential employees think of your company if there wasn't a pleasant lobby to walk into on the ground floor?


The answer to all of these questions is your building's common area. These common spaces are what make office buildings (and, for that matter, enclosed retail spaces) work. And, given that they're valuable, you're going to pay for them.


When you lease a 40 by 80 foot space, you don't pay for 3,200 square feet. Instead, you pay for your 3,200 square feet and your share of the building's common area. While buildings vary, it's reasonable to expect that you would end up paying rent on anywhere from 320 to 600 additional square feet. That 3,520 to 3,800 square foot space represents your office and a portion of the hallways, amenities and lobbies of the building.

Here are Six Amenities to Look for in Office Space


Calculating the Load Factor

Sometimes also called a core factor, the load factor expresses how much additional common area space you pay for when you occupy an office building. To calculate the load factor, the landlord adds up all of the building's gross rentable space -- which is everything inside the exterior walls less any vertical penetrations (like elevator shafts and stairways). Then, they subtract out all of the spaces inside tenant suites. The space left is the common area.


For example, picture a single story building that measures 200 feet long and 100 feet wide. The building's gross rentable space is 20,000 square feet (200 feet times 100 feet). In that building, there are 500 square feet of restrooms, 1,000 square feet of hallways, 300 square feet of lobby space and a shared 400 square foot classroom. This adds up to 2,200 square feet of common area, leaving 17,800 square feet of rentable space.


To calculate the building's load factor, divide the 2,200 into 17,800. You will find a load factor of 12.36 percent. This means that when you lease a space, you'll pay for its actual measurements plus 12.36 percent. So if you take a 2,000 square foot space, you'll actually end up paying rent on 2,247 square feet. The extra 247 square feet is the pro-rata share of common area.


Reversing the Load Factor

You can also turn the load factor around into a loss factor. Loss factors are useful if you are quoted sizes that include the common area. For instance, if the landlord tells you that he has a 3,371 rentable square foot vacancy in a building with a 12.36 percent load factor, you can find out the actual size of the space without measuring it. Divide the rentable square footage by the load factor, expressed as a decimal, plus one. So, you would divide 3,371 by 1.1236 to find the actual size of the size -- 3,000 square feet.


Here are some other great articles:

The Future of Office Space

5 Office Lease Terms to Watch For

Letter of Intent Tips for Tenants


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Don Catalano

Don Catalano