So, you have found the perfect space for your business. It has a great location, ample parking and it is ready to move in. You know how much the rent is going to be on a per square foot basis, but you need to determine how big the space is. This will decide what your monthly payment will be.
When you ask the property owner how big the space is, he tells you it is 1,000 square feet. In your mind, the space does not look that large. You ask the property owner if you can confirm that and he agrees.
When you measure the space, you find it is only around 900 square feet. When you relay this information to the property owner, he states that you have measured the usable square feet whereas he is measuring the rentable square feet. What is the difference and why is there one?
Many methods are used to calculate square footage in commercial leases. Usable square footage refers to the actual occupied area leased. Rentable square footage is the sum of the usable square footage and a portion of common areas and other non-leasable building areas allocated to the area leased (often determined by applying a percentage load factor to the usable square footage).
The portion of such other areas to be added to the space’s leased usable area is negotiable.
The most widely used U.S. standard for measuring office buildings is published by the Building Owners and Managers Association International. First published in 1915, the BOMA Standard has been revised various times to reflect industry changes.
Though widely used, the BOMA standard is voluntary. Property owners may choose not to use it at all or may elect from a variety of versions of the standard to apply. The selection of the appropriate BOMA standard version to be used is not always straightforward.
More importantly, when property owners and tenants disagree on which standard to use, the difference in rent over the lease term can be substantial.
Since there is no universal industry agreement on measuring and allocating space, it is critical to understand how much space you are responsible for paying rent on before you sign a lease.
This is where your commercial real estate agent will be able to guide you through the differences in the types of measurements. They will understand which system a property owner is using and how to negotiate on your behalf to get the best outcome for your situation.
Brian Johnson is the new president of the Santa Barbara Association of Realtors. He is a California licensed real estate agent and the managing director of Radius Commercial Real Estate. Brian handles all types of commercial real estate transactions, but has a special focus on multifamily investments. He can be reached at 805.879.9631 or firstname.lastname@example.org.