“How come this office suite measures 5,000 square feet but the landlord is claiming it’s 5,900 square feet?”
Understanding the difference between Rentable Square Feet (RSF) and Useable Square Feet (USF) is important when evaluating the efficiency of a building and more importantly, how much more space are you paying for that you’re not actually occupying. The USF is the actual square footage a tenant occupies, and the RSF is the number that takes into consideration common areas of the building by tacking it onto your true square footage.
Basically, a landlord seeks to capture rent on every single square inch of the building (they can get away with), therefore all “common” areas of a building are calculated and then expressed as a percentage of the whole building. This percentage is called a building’s “Load Factor”. Therefore, if 18% of the building is comprised of common areas such as lobbies, hallways and common bathrooms, then that’s the number that’s added on top of your Useable Square Footage. So in the example above, multiplying 5,000 USF by 18% will yield an RSF of 5,900.
Load Factor percentages can range anywhere from 0-25% but usually hover around the 18-23% range. As a general rule of thumb, larger, newer, “Class A” buildings typically have a larger Load Factor and are therefore less efficient.
The loss in efficiency (i.e. huge lobby with waterfall and fancy artwork) isn’t necessarily a bad thing, as paying extra for that high-class image is important to a lot of companies and worth the added expense. However, a good broker should be aware of each building’s Load Factor so that their client can decide for themselves if paying a premium is worth it. This is precisely why two “8,000” square foot office suites can look very different, size-wise.
So next time you walk through the lobby of your firm’s sky-rise building and notice the 6 security guards at the counter and a water fountain that could host the America’s Cup, enjoy; you’re paying for it.