Rentable-to-Usable Ratio.The measurement of office space and the buzz words associated with it can be confusing. It can also lead to very expensive conditions. Real estate brokers may use similar terms as building developers but the two may be different enough to cause design difficulty and possibly rental increases. The Building Owners and Managers Association (BOMA) has established a well recognized and accepted definition and form of measuring office space (see Chapter 5). This has been extremely helpful. A story going around was that a tenant, confused about how the office space was measured, asked the developer what points of measurement were used to come up with the tenant’s square footage. The developer nodded and proceeded to point to the interior wall near the corridor as one dimension and pointed to the yellow line in the middle of the street outside as the other.
In addition to the pure measurement needs of an architect and to determine the amount of space upon which to multiply the rental rate, the differences between a number of buildings in how they calculate their measurements will considerably impact your financial analysis.Affordable Lease Analysis software is also readily available through the internet.Your agent should already have this ability, but retail financial analysis software is now so affordable and intuitive, you might want to have control of it yourself.
The higher the Loss (or load) factor, the less efficient the space shall be for the purposes of calculating rent. The usable area is the definitive area that the tenant will occupy. Grossing up this usable area to include the tenants proportionate share of the building's common areas will increase the final figure on which the rental is multiplied. But all is not as it appears. A major stock brokerage firm had plans of leasing office space in one of two buildings. Building number one, a brand new granite and glass beauty had a rental rate of $22.00 per sq. ft. and building number two, an older dowdy building had a rate of $18.00 per sq, ft., both full service leases. Their attention was naturally directed toward the lower priced building number two. However, the higher priced, new building had a rentable-to-usable ratio of 10.7%. The old dowdy had a ratio of 18.5%. Additionally, building two had air-conditioning/heating units within the space surrounding the interior of the exterior wall, The depth of this unit was three feet which meant the tenant's real use was three feet inside the point from the space was measured. Taking into account the higher load factor and the unusable area, the older dowdy building actually cost this firm more than if they had leased the new beauty.This firm could have had a silk purse, instead it chose a sow’s ear.Interestingly, this firm is no longer in business.The point is: Don’t listen to the landlord or the marketing material or the silver tongue listing agent. Let your team smoke this entire element out.
