When looking at commercial real estate in Niagara and Hamilton, you’ll eventually encounter the question of usable or rentable square feet. If you’re making a commercial investment, you know the value of income producing properties in the commercial real estate market and will be looking to expand your real estate portfolio. If you are not investing, you may be examining the commercial office market and looking to move your business to a larger office. Whether you’re an investor or a renter, it is crucial to understand the difference between usable and rentable square feet. While the difference between the two may seem obvious, it will have an effect on the price you ultimately pay or receive from your tenants.
What is usable square footage?
Usable square footage is the actual space you occupy from wall to wall. It does not include shared areas (such as lobby, restroom, stairwell, etc.). If the area will be used exclusively by the tenant, it is included in the total usable square footage.
What is rentable square footage?
Rentable square footage is your usable square footage in addition to a portion of the property’s shared space that is of benefit to a tenant. Shared space includes restrooms, lobbies, stairwells, etc. Commercial real estate tenants’ monthly rent is always calculated on rentable square footage.
Evaluating the cost
When evaluating real estate in the commercial sector it’s best to be aware of the common area factor to understand why you’re paying what you. There are two common area factors that determine the square footage a tenant will be responsible for paying rent for.
Floor common area factor
Refers to common areas on that floor only
Building common area factor
Refers to common areas for all tenants in the building
The Calculation- Common Area Factor
To calculate the common area factor, you first need to determine how much floor area the building has. Then subtract the shared square footage. This will determine the usable square footage. You will be able obtain this information from your commercial real estate agent.
Common Area Factor = Rentable sq. ft./usable sq. ft.
Understanding the common area factor with respect to usable and rentable square footage will allow you to compare different properties and understand how much space you are actually paying for.
Finding a spot to fit your budget is only part of the real estate criteria you will need to examine. Working with a commercial real estate agent will ensure that you are making an informed decision regarding your next commercial leasing investment. For more information on commercial real estate metrics, click here.