April 16, 2021
Every rental property has a total amount of square footage. Out of that total measurement of space, not all square feet of the building are considered usable space for a tenant signing a lease.
What is usable space, and how does it relate to CRE rentals?
What Is Usable Square Footage?
The metric of usable square footage is a way to determine how much of a rental property a tenant will realistically be using, so that rental contracts can be written out with fairness in mind. Instead of paying for the entire square footage of a property, tenants can pay for only their usable square footage.
Usable space is a metric seen only in CRE leases, not in consumer leases.
How Usable Square Footage Is Measured
Usable square footage is a tangible measurement, not a flaky real estate phrase. It is composed of the square footage that’s exclusively rented out to a specific tenant, measured from the outdoor walls of each space.
If an entire floor or building is being exclusively rented, the space will be measured together. If individual rooms within a building are rented separately, spaces will be measured separately.
Usable square footage includes:
- Indoor square footage assigned to a specific tenant
- All square footage needed for operation of the space a tenant is renting
- All floors and rooms exclusively rented out to a tenant, including hallways and storage
- It does not include:
- Small structural elements within the main space (pillars, columns, etc.)
- Common areas in use by multiple tenants (shared hallways, restrooms, storage, etc.)
- Non-occupiable outdoor spaces
Usable Vs Rentable Square Footage
Once a landlord and tenant have worked out the usable square footage, an additional calculation is needed to determine what the tenant will actually be paying for on their lease. This calculation is to find the rentable square footage.
Rentable square footage is a tenant’s usable square footage combined with some percentage of the common areas in a building. If a tenant is renting the entire building, the rentable and usable square footage will likely be the same or close to the same. If there are multiple tenants on one property, they will share the cost burden of common areas.
Tenants aren’t off the hook for common areas just because they aren’t exclusively renting them out. Afterall, how can you enter your office in a shared building if you don’t use the common lobby, elevator, stairs, and hallways?
These are spaces that tenants have access to, even though it’s not exclusive access. That access must be accounted for but cannot be placed on a single client. By sharing the common area cost between tenants, rentable space gives a more accurate picture of how much a tenant should be paying in relation to the property costs.
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