Understanding Rentable vs Usable Square Foot Equation

You’re in the market for a new commercial space. Your entrepreneurial attitude as of late represents an optimal blend of both stress and eagerness. You’re ready to take the next step in your journey, but in order to find the perfect location for your emerging business, you’ll need to comprehensively understand the dynamics of rentable vs. usable square footage — a key lesson to learn before beginning your search for a new modern Vancouver office space.

This equation helps architects, business owners, and entrepreneurs plan and decisively strategize how the environment and spatial awareness play a role in how a business can utilize its space – and justify costs – effectively.

There are a plethora of critical factors to consider when making this decision

What part of the city?

Proximity to transportation?

Convenient amenities?

Cleanliness

Quality

One of the most important factors of your new office will most likely be the size of the space itself.

Office Size Matters!

Office size can powerfully impact employee capacity, satisfaction, retention, furniture configuration and layout. Moreover, it can affect the overall aesthetic and identity of your business.

Perhaps most importantly, office size directly correlates to an increase or decrease in your monthly costs. Depending on the rentable square footage of a space, all will come with different price tags. This is when it becomes important to differentiate between usable space and the amount of square footage that you’re renting in total.

Usable Space Considerations

In short, usable square footage is all of the real estate you are leasing from wall to wall once you subtract common areas that play no role in the success of the business — spaces like:

Shared bathrooms
Kitchens
Hallways
Lobbies
Stairwells

Usable space is everything that encompasses your business operating space. For example, if your company leases an entire floor of a high rise office building, this is all considered usable space, even if there are kitchens, bathrooms and closets outside the actual office area.

The differentiation of rentable square footage is the usable space plus all of the shared common areas — even if these areas are shared with other tenants.

The Square Foot Equation

What these misunderstandings center around the load factor or “common area” element of the square footage calculation. This is the percentage of the rentable space that is shared with other tenants of the building.

To determine the load factor, you simply divide the rentable square footage by the usable square footage. Typically, this number will be somewhere around 10-15%.

How To Calculate Rentable Square Footage?

The rentable square footage equals the usable square footage (USF) plus your share of the common areas of the building. To calculate this, you need to know the building’s total rentable area and its total usable area.

How To Calculate Load Factor In Real Estate?

Calculating usable square footage should be your first step. You need to find the building’s total floor area then subtract all shared square footage to get your total usable square footage.

Next, you simply divide the rentable square footage by the usable square footage to determine the load factor. Typically, this number will be somewhere around 10-15%.

How to Avoid Square Footage Misunderstandings

Be Knowledgeable of What Rentable Space Includes

Let’s imagine you find a fantastic office space with 7,000 square feet of rentable space. This might be just what you’re looking for, but be sure to take a moment to ask about the load factor. Shared common spaces may knock your actual usable space down to just 5,000 square feet and based on your own pre-determined requirements, that may not be large enough to accommodate your growing team of employees.

Asking about the load factor should lead to your initial discussions with landlords and/or property management representatives. Having this information will give you an accurate representation of how much space will ultimately be shared between all tenants, and will immediately tell you if the space is large enough to welcome your interior design plans and your team.

square foot equation

Is the Load Factor Worth the Extra Monthly Cost?

Once you’ve collected data and know the actual usable space, you’ll need to determine if the excess shared common areas are worth the additional expenditure. For argument sake, imagine there are two offices with 7,000 square feet of rentable space. One office has a 15% load factor and the other has a 20% load factor.

You’re likely to be more inclined to rent the office with the 15% load factor due to less common area and more usable space. However, if the amenities and condition of the other office are in better condition and more desirable, you might decide to take the office with the 20% load factor.

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Reading the fine print is important, but not as important as understanding what the fine print means. Be sure to fully understand that the load factor is the true usable square footage of the space and not the rentable square footage by which landlords price their spaces.

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