Space & Measurement
Load factor
Also called: common area factor, add-on factor, rentable to usable ratio
Load factor is the percentage added to a tenant's usable square footage to arrive at rentable square footage, covering a share of lobbies, corridors, restrooms, and mechanical rooms. A 15 percent load factor means a 10,000 usable foot suite is billed as 11,500 rentable feet.
Rent is quoted on rentable square feet, but a tenant only occupies usable square feet. The gap between the two is the load factor, and it is a real cost that is rarely negotiated because it is rarely examined.
The arithmetic
Rentable = usable multiplied by (1 + load factor). A suite with 10,000 usable feet in a building with a 15 percent load factor is 11,500 rentable feet. At $32.00 per rentable foot, the tenant pays $368,000 per year, or $36.80 per foot of space it can actually use.
What is typical
Single tenant and industrial buildings run near zero. Suburban office commonly lands between 10 and 16 percent. Full floor tenancies in multi tenant towers run higher, often 15 to 20 percent, and multi tenant floors in trophy buildings can exceed 20 percent once a share of the ground floor lobby and amenity space is added.
Where it goes wrong
- Load factor applied twice. A tenant on a multi tenant floor may be charged a floor factor for the corridor and restrooms plus a building factor for the lobby. That is legitimate when disclosed, and a problem when the quoted number already included both and gets applied again.
- An undisclosed change on renewal or expansion. Remeasurement between the original lease and an expansion can silently increase rentable footage without any physical change.
- The measurement standard. BOMA has several standards and they produce different numbers. The lease should name the standard and the version, and ideally attach the measurement.
Why it affects more than rent
Rentable square footage drives the pro rata share used for operating expenses, the tenant improvement allowance if quoted per rentable foot, and the parking ratio. An increase in stated rentable area therefore raises four numbers at once.
In the redline
Rentable square footage appears in the basic lease provisions at the front of the document, which is where people stop reading closely after round one. A change from 11,500 to 11,740 rentable feet is two digits and it moves rent, expenses, and allowance together. Verify the stated square footage in every round against the LOI.
Catch this clause when it changes
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Analyze your first round freeRelated terms
CAM charges are the tenant's proportionate share of the cost of operating and maintaining a property's shared areas, billed monthly as an estimate and trued up against actual spend after the year closes.
A tenant improvement allowance is a sum the landlord contributes toward building out a leased space, usually quoted in dollars per rentable square foot and paid on completion against submitted invoices.
A letter of intent is a short document setting out the principal business terms of a proposed lease — space, term, rent, allowance, and options — before either side spends money on a full lease draft.
A recapture clause lets a landlord take back leased space and terminate the lease as to that space when a tenant requests consent to assign or sublet, or when the tenant goes dark.
This page is general information, not legal advice. Review lease language with qualified counsel.