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.
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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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Related Questions
What is the difference between usable square feet and rentable square feet in commercial real estate?
The difference between usable square feet (USF) and rentable square feet (RSF) in commercial real estate is that USF refers to the area a commercial tenant can actually use, while RSF includes the tenant's USF plus a portion of the common areas shared by all tenants in the building. USF 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. Source
How is usable square feet calculated in commercial real estate?
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.
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.
How is rentable square feet calculated in commercial real estate?
Rentable square feet in commercial real estate is calculated by using the formula: Load Factor = Rentable Square Feet/Usable Square Feet. 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%. 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.
What factors should be considered when determining usable square feet in commercial real estate?
When determining usable square feet in commercial real estate, tenants should consider the area they can actually use, which generally includes hallways and private restrooms, as well as structural features like columns and recessed entries. However, public restrooms, stairwells, lobbies, and other shared areas are not included in the usable square feet. Tenants that lease an entire floor should also note that most areas, except for elevators and stairwells, are generally counted as part of the tenant’s usable square feet. Source
What factors should be considered when determining rentable square feet in commercial real estate?
When determining rentable square feet in commercial real estate, tenants should consider the load factor, which is calculated by dividing the rentable square feet by the usable square feet. Load factor can range from as low as 3% to as high as 25%, and is usually between 10% and 25%. Tenants should also consider the amenities offered in the building, as they can vary greatly depending on the tenant's specific business. Finally, tenants should consider having the space remeasured by a certified professional before signing a long-term lease. For more information, please see the Usable Square Feet vs. Rentable Square Feet in Commercial Real Estate page on CommercialRealEstate.Loans.
What are the benefits of understanding the difference between usable square feet and rentable square feet in commercial real estate?
Understanding the difference between usable square feet (USF) and rentable square feet (RSF) in commercial real estate can help tenants and landlords alike. For tenants, understanding the difference between USF and RSF can help them accurately calculate the amount of space they need and the amount of rent they will be paying. For landlords, understanding the difference between USF and RSF can help them accurately calculate the amount of rent they can charge for a given space.
For example, if a tenant is looking to lease a space with 1,000 RSF, they may not realize that the actual usable space is only 800 USF. This means that the tenant is paying for 200 RSF of shared space that they cannot use. On the other hand, if a landlord is looking to lease a space with 1,000 USF, they may not realize that they can charge for 1,200 RSF of rentable space.
By understanding the difference between USF and RSF, tenants and landlords can make more informed decisions when it comes to leasing commercial real estate.