- Understand the loss factor calculation
- Utilize the services of an experienced space planner or architect
- Have the space measured prior to lease signing
It is important for tenants to fully understand the concept of space measurement when going for Clifton Park office leasing in a multi-tenanted building. Office space is typically quoted as a rentable number of square feet. Rental rates are quoted per square foot on an annual basis. This rentable number is the square footage you pay to lease. It is multiplied by the per square foot rate to calculate the annual rent. However, built in to this number is a “common area factor” for the hallways, lobby, staircases, elevators, common restrooms, etc. which are also used by the tenant. This common area factor is referred to as a loss or add on and is quoted as a percentage. The usable square feet number represents the space you actually occupy within your unit of leased space and is less than the rentable square feet you are paying for. Measurements used in determining commercial space rents are based on guidelines set by the Building Owners and Managers Association (BOMA) International.
As an example, if a tenant is considering two buildings with the same rental rate of $25 per square foot and building A has a loss factor of 15% the tenant will pay $29.41 per usable square foot and occupy 17,000 square feet. If the same tenant leases space in building B with a loss factor of 20%, the tenant will pay $31.25 per usable square foot and occupy 16,000 square feet.
Following is the method used to calculate the usable space:
Rentable square foot = Usable square foot X (1 + Add on %)
Rentable divided by Usable = add on factor
Rentable square foot X (1-Loss factor %) = Usable square foot
If a landlord wants to remain competitive and the building has a higher than average loss factor the landlord may adjust the rental rate down or absorb a portion of the loss factor to bring it in line with neighboring properties. A tenant looking for a Class A building with a grand lobby may not be as concerned with a high add on or loss factor, but it is a component of the financial aspect of the lease and should be factored in.
This information must be understood prior to lease signing. Typically leases describe the space to be leased as “approximate.” The loss factor is not detailed in the lease.
Another important factor is to only commit to occupying the minimum amount of space necessary to operate your business. Start by analyzing your needs regarding components of the space plan i.e. number of private offices, size of bullpen area, conference room etc. as well as the placement of employees within your space. An experienced space planner can draft various versions in order to discover the most efficient use of space to minimize your necessary square footage and create the most functional floor plan for your specific needs.
Also, most proposals include language that specifies the square footage is to be confirmed by an architect. It is important that this be done to avoid paying for more space than you occupy.
The key when considering various buildings to lease is comparing the rental rate per usable square foot. A property with a higher asking rent and a lower loss factor may be a better value than a lower asking rent and a higher loss factor. A financial analysis is the most comprehensive method to compare occupancy costs for office properties. This analysis accounts for both rentable and usable rental rates as well as any additional monthly costs. It calculates each space down to a finite number for the occupancy cost for the lease term. This enables you to compare your options and make an educated decision.
For more information, please visit here: http://cliftonparkofficerentals.mystrikingly.com/