Usable Square Feet vs. Rentable Square Feet in Commercial Real Estate

Usable Square Feet vs. Rentable Square Feet in Commercial Real Estate

In commercial real estate, there are two major ways to evaluate a property’s size; usable square feet (USF) and rentable square feet (RSF). In general, this applies most to office and retail properties with multiple tenants, and is not usually applicable to multifamily and industrial properties.

The Definition of Usable Square Feet

Usable square feet, or USF, refers to the area a commercial tenant can actually use. It generally includes hallways and private restrooms, as well as structural features like columns and recessed entries, but does not include public restrooms, stairwells, lobbies, and other shared areas. For commercial tenants that lease an entire floor, most areas, except for elevators and stairwells, are generally counted as part of the tenant’s USF.

The Definition of Rentable Square Feet

In contrast to usable square feet, rentable square feet, or RSF, refers to a tenant’s USF, in addition to their pro-rata share of any shared spaces in the building. This includes public restrooms, lobbies, hallways, and other areas which a tenant could benefit from, but is not using exclusively. For example, if two retail tenants each occupy 50% of the first floor of a shopping mall, they would each pay 50% of the per square foot (PSF) cost of the common areas.

The difference between a commercial building’s usable square footage and rentable square footage is called its load factor, which is sometimes also referred to as a common area factor. Buildings like shopping malls, with public restrooms and large lobbies/mezzanines generally have significantly higher load factors than private offices, which may only have a small amount of public or shared areas (if any).

Load Factor in Commercial Leasing

As we just mentioned, the load factor helps commercial tenants determine just how much common space they will be paying for. Load factor can be calculated by using the formula below:

Load Factor = Rentable Square Feet/Usable Square Feet

So, for example, if the first floor of a shopping mall had a rentable square footage of 200,000 sq. ft., but a usable square footage of 190,000 sq. ft., the building would have a load factor of 1.052, or 5.2%. Tenants looking to save money will often gravitate towards buildings with a lower load factor, but will usually look closely at the amenities offered in order to determine their utility. The utility of public areas and amenities can vary greatly, depending on a tenant’s specific business. For example, in an office building, a prestigious law firm may prefer a large mezzanine area, in order to impress potential clients, while a small engineering firm may not find this necessary. Most load factors are between 10% and 25%, though some buildings may have load factors as low as 3%.

In most cases, buildings are measured using standards created by the Building Owners and Managers Association (BOMA). Commercial tenants, especially those considering signing a long-term lease, may wish to have the space remeasured by a certified professional before making a final decision.

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