Place Emphasis on Finding Out Space's Loss Factor Figure

October 27, 2017
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If the size of the space you’re considering leasing seems perfect, don’t overlook important issues like making sure that your business actually will physically fit the area. Just because a space is advertised as a certain number of square feet doesn’t mean that all of that square footage is available for practical use. And if you’re paying for unusable square feet, thinking that it’s viable for your workers and equipment, you’re getting a raw deal. Instead of unknowingly being charged for space that isn’t actually accessible, ask whether the advertised space is the “rentable area” or “usable area,” and what the “loss factor” is.

In recent years, a universal measurement standard has been approved, but because it’s still relatively new, you might want to suggest the tried-and-true Building Owners and Managers Association (BOMA) standard. Created to simplify and standardize the measurement of office space, the BOMA standard relies on three important terms: “usable area,” “rentable area,” and “loss factor.

  • The usable area is the actual space that the tenant can use as office space. This is the area in which you can place actual furniture, equipment, and employees.
  • The rentable area is the tenant’s gross square footage on the entire office floor, plus the tenant’s pro-rata share of the building’s common areas, such as the lobby, corridors, and restrooms. The rentable area does not include the balconies, pipe shafts, vertical ducts, elevator cores, stairwell areas, flues, and other similar columns and projections.
  • The difference between the rentable area and the usable area in the building is the “loss factor.” The loss factor is the percentage of space in a building that’s not usable. For example, if it’s determined that 20 percent of the building is dedicated to common area space, 20 percent will become the loss factor for every lease in that building.

Your owner or property manager will probably use the BOMA standard to determine space and base your rental rates on the rentable area. Therefore, when you’re quoted the rentable area, to get an accurate measurement of the space that you can actually use (usable area), divide the rentable area by the loss factor plus 1 (that is, if the loss factor is 20 percent, add “1” to get 1.20).

So, when you’re looking at potential spaces, ask whether the space advertised is the rentable area, subject to a loss factor, and if so, what the loss factor is. You can always ask your broker to review your calculations to make sure you’re getting it right before signing the lease.