GLA: Gross Leasable Area in Commercial Real Estate
Gross leasable area (GLA) is the amount of space in a commercial building that can be rented by a tenant, including basements, mezzanines, or upper floors.
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What Is Gross Leasable Area in Commercial Real Estate?
Gross leasable area (GLA) is the amount of space in a commercial building that can actually be rented by a tenant. In most cases, this includes basements, mezzanines, or upper floors that a tenant can potentially utilize. Typically GLA is measured from the center of a wall or other partition that separates tenants (such as retail stores in a shopping mall) from the lease line in common areas. It also fully takes into account any walls that are not shared with other tenants.
Investors Can Use GLA to Help Calculate GPR
Since it's common in commercial real estate to calculate rent per square foot, you can use a property's GLA to calculate the gross potential rent (GPR) of the property. For example, if the annual market rent for a certain building is estimated at $10/square foot, and the building's GLA is 20,000 square feet, then the annual GPR of the building would be $200,000.
However, it's important to remember that GPR is the most a project could make in rent. And, since buildings are rarely at 100% occupancy, most make significantly less. Therefore, if you plan to acquire commercial real estate, it may be more effective to look at the building's rent roll (a record of all current leases and rental income), and its TTM (trailing twelve months), or T3 (trailing three months) financial metrics.
BOMA Standards Typically Regulate How GLA is Measured
Before you make any significant calculations using a building's GLA, you'll want to be sure that you're working with accurate information. BOMA, or the Building Owners and Managers Association, is the most widely accepted set of standards for measuring commercial buildings, including office buildings, multifamily projects, and retail buildings. Therefore, for specific questions about how a part of a building may be included in its GLA, consult their website for more information.
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Related Questions
What is Gross Leasable Area (GLA) in commercial real estate?
Gross leasable area (GLA) is the amount of space in a commercial building that can actually be rented by a tenant. In most cases, this includes basements, mezzanines, or upper floors that a tenant can potentially utilize. Typically GLA is measured from the center of a wall or other partition that separates tenants (such as retail stores in a shopping mall) from the lease line in common areas. It also fully takes into account any walls that are not shared with other tenants. Gross leasable area typically includes mezzanines, basements, and upper floors, but excludes shared areas, such as elevators, loading docks, vault rooms, public bathrooms or maintenance/utility areas.
How is Gross Leasable Area (GLA) calculated in commercial real estate?
Gross leasable area (GLA) is calculated by measuring the area from the center of a wall or other partition that separates tenants from the lease line in common areas. It also takes into account any walls that are not shared with other tenants. This includes basements, mezzanines, or upper floors that a tenant can potentially utilize.
For example, in a shopping mall, GLA would include the area of each retail store from the lease line in the common area. It would also include any walls that are not shared with other tenants.
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What are the benefits of Gross Leasable Area (GLA) in commercial real estate?
The benefits of Gross Leasable Area (GLA) in commercial real estate are that it allows tenants to utilize basements, mezzanines, or upper floors that they may not have been able to use otherwise. This can help tenants maximize their space and increase their potential revenue. Additionally, GLA is measured from the center of a wall or other partition that separates tenants, and it takes into account any walls that are not shared with other tenants. This helps tenants to have more privacy and control over their space.
What are the drawbacks of Gross Leasable Area (GLA) in commercial real estate?
The main drawback of Gross Leasable Area (GLA) in commercial real estate is that it does not take into account shared areas, such as elevators, loading docks, vault rooms, public bathrooms or maintenance/utility areas. This can lead to confusion between tenants and landlords, as the tenant may not be aware of the areas that are not included in the GLA. Additionally, the GLA does not take into account any walls that are shared with other tenants, which can lead to disputes over the exact size of the space being leased.
Source: www.commercialrealestate.loans/commercial-real-estate-glossary/gla-gross-leasable-area and apartment.loans/posts/gross-leasable-area
How can I use Gross Leasable Area (GLA) to my advantage when financing a commercial real estate project?
You can use a property's GLA to calculate the gross potential rent (GPR) of the property. For example, if the annual market rent for a certain building is estimated at $10/square foot, and the building's GLA is 20,000 square feet, then the annual GPR of the building would be $200,000.
However, it's important to remember that GPR is the most a project could make in rent. And, since buildings are rarely at 100% occupancy, most make significantly less. Therefore, if you plan to acquire commercial real estate, it may be more effective to look at the building's rent roll (a record of all current leases and rental income), and its trailing twelve months (TTM) or trailing three months (T3) financial metrics.
You can use these metrics to help you determine the loan amount you can qualify for and the terms of the loan. For example, most lenders will require a certain debt service coverage ratio (DSCR) to qualify for a loan. The DSCR is calculated by dividing the net operating income (NOI) of the property by the total debt service of the loan. If the DSCR is too low, the lender may require a higher down payment or a shorter loan term.