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Useable vs Rentable Square Feet

Author: Re'Nauta Bell
Categories: Education,Expectations,My Posts

DO I NEED TO KNOW THE DIFFERENCE? 

Being able to make sense of usable vs rentable square feet is vital for knowing how much space you are really going to get when you rent an office for your company. Knowing the difference between usable square feet and rentable square feet can mean all the difference in evaluating the best deal on a commercial lease. Office space is generally listed with a rentable square footage rate, which includes more square feet than the actual space the tenant will occupy. Having this knowledge will also help you ensure that you are getting the best possible deal on an office space and that you have an accurate idea of how much space you will be getting.

 

 

 

USEABLE SQUARE FEET

Let’s talk about useable square feet.  The usable square feet of a space is defined as the total area unique to the tenant. Think of it as the space specifically set aside for your company’s use. Once you walk into your suite, the area inside is considered usable square feet.  The calculation of this number will be slightly different for tenants leasing a full floor vs tenants leasing a partial floor. For a partial floor lease, this includes all office space plus any storage areas or private restrooms unique to your suite. It also includes space taken up by things like columns or recessed entries.

RENTABLE SQUARE FEET

Rentable square feet.  Let’s talk about it.  So what is rentable square feet?  A commercial office building is not made up of private offices and cubicles alone. Corridors, meeting spaces, lobbies, stairways, restrooms and so on are used by all building tenants, and landlords charge for the use of this space as well. Rentable office space includes the usable square feet of the office space plus a pro-rata share of building common areas. Pro-rata means that tenants pay for these common areas in proportion to the amount of space they lease in the building.

 

recessed entry

 

CALCULATE RENTABLE SQUARE FEET

So how do you calculate the rentable square feet? To calculate rentable square feet, landlords use what is called a load factor (also called a common area factor, or an add-on factor).  They use the load factor to figure rentable square feet for individual tenants. This number is based on the percentage of common areas found in the building. If a building has a total square footage of 100,000, with 85,000 usable square feet.  This would leave 15,000 square feet of common areas and the load factor would equal to the rentable square feet divided by the usable square feet, or 1.15.

 

The formula for calculating load factor goes just like this:

Building Rentable Square Feet ÷ Building Usable Square Feet = Load Factor

So that would be, in this example,:  100,000 ÷ 85,000 = 1.15

 

This load factor is then multiplied by the individual tenants’ usable square feet to come up with the total rentable square feet. If a company desired to lease 5,000 usable square feet, for example, this number would be multiplied by the load factor of 1.15 to reach the number of rentable square feet:

 

The formula is as follows:

Tenant Usable Square Feet x Load Factor = Tenant Rentable Square Feet

5,000 usable square feet x 1.15 = 5,750 rentable square feet.

 

The rentable square foot amount would then be multiplied by a rental rate to come up with the company’s total annual or monthly rent.

 

office 2

 

Knowing this formula helps companies to evaluate their best deal for office space. Suppose a company compared two 5,000 usable square foot office spaces with the same rental rate from two buildings with load factors of 1.15 and 1.20.

 

5,000 usable square feet x 1.15 = 5,750 rentable square feet

5,000 usable square feet x 1.20 = 6,000 rentable square feet

 

 

In the first building, the rent would be based on 5,750 square feet, whereas the second building would charge rent based on 6,000 square feet. The building with the lower load factor would save the company significant money.

On the other hand, the company may decide that the extra money is worth the larger, fancier lobby, or more spacious kitchenette. It could be the company’s best decision to value the amenities more than the extra cash. The important thing is for companies to do a little math and figure out exactly what they are paying for in order to make intelligent decisions about value.

 

 

Load factors, often represented as a percentage, commonly range between 10% and 20%. Often a partial-floor tenant will pay a floor common area share as well, in order to pay for use of the floor’s corridors and bathrooms, etc. The landlord will calculate the tenants usable square feet times the proportion of space the tenant occupies on the floor to come up with a floor rentable square feet figure; that number is then also multiplied by the building’s load factor.

Now you have a little extra insight into commercial real estate and how those square footage figures you see in office space listings are actually calculated. Ideally, when you are looking for a new office, you will be working with a commercial real estate broker who will be able to walk you through issues like this, but it is always smart to be informed and aware. Also note that if you see the abbreviation USF, that stands for usable square feet, and the abbreviation RSF stands for rentable square feet.

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Crash Course – Commercial Real Estate 101

Author: Re'Nauta Bell
Categories: Atlanta Market News,Expectations,Market Insights,My Posts

 

“What is commercial real estate?”

 

Commercial real estate is an industry that is not necessarily widely known and promoted.  Because of that, when some people hear the term real estate, they automatically think of a residential property.  Most likely, the reason for this is because much of the population has either directly or indirectly experienced facets of the home-buying experience.  On the surface, they may seem similar, but there are many, many differences between commercial real estate and residential real estate.  Let’s talk about some of them.  Welcome to your crash course – Commercial Real Estate 101.

 

“The main difference is…”

A property that provides a living space is considered residential real estate.  On the flip side, a property that is exclusively used for business-related purposes with the intention of generating income, is considered commercial real estate.  Commercial real estate is segmented into different niches to include retail, industrial, land, multi-family, mixed-use developments, and office.  The performance of commercial property, including sales prices and new building rates, are often used as a measure for business activity in a given market or submarket. 

 

 

“What is retail real estate?”

Retail properties are used to market and sell consumer goods and services. They range from shopping centers to individual stores and pop-up shops to big box stores like Saks Fifth Avenue and JCPenney.

 

 

“What is industrial real estate?”

An industrial property is a property that is used for the actual manufacturing of something.  It can either be considered a factory or plant.  These building types are usually zoned for light, medium, or heavy industrial.  This includes uses such as warehouses, garages, and distribution centers.

 

“What is land real estate?”

Land is real estate property, less buildings and equipment, which is designated by fixed, spatial boundaries.  Land ownership might offer the titleholder the right to any natural resources that exist within the boundaries of their land. 

 

 

“What is multi-family real estate?”

A multi-family property is any residential property that contains more than one housing unit to include duplexes, townhomes, apartment buildings, and condominiums.  These are some of the most common examples. 

 

“What is mixed-use real estate?”

Mixed-use properties or developments combine residential and non-residential buildings.  They can be a single building, multiple buildings, or an entire neighborhood.  Mixed-use developments provide ample access to community amenities and foster community involvement.  

 

 

“What is office real estate?”

Lastly, we have office real estate, which is what I focus on.  Office properties are occupied for a variety of different purposes.  Office users can engage in retail enterprises, services businesses, non-profit organizations, technology firms, etc.  Office can refer to entire buildings, a floor, parts of a floor, or office parks such as Concourse Office Park in Atlanta, GA featuring the King and Queen towers.  Office buildings are categorized by their height.

 

“How is a building defined by its height?”

An office building has less than 7 stories above ground level is classified as a low-rise building.  An office building that has between 7 and 25 stories above ground level, is classified as a low-rise building.  An office building that has more than 25 stories ground-level building, is classified as a high-rise building.  Office buildings are further categorized by class.

 

 

“What is building class?”

 

Class A – Building classes range from A to C and are determined based upon the physical and locational aspects of building.  Class A properties tend to accommodate users who need high-quality finishes and materials to attract a specific employee or customer.  The building is normally located close to amenities and prestigious areas.

Class B – With class B properties, they tend to be more functional and probably will be highly efficient.  They will be nice but cost-effect and sometimes building age considered when classifying a building.  If the building has high-quality finishes but the design is kind of dated, the building could be considered a Class B.

Class C – Class C Properties have physical, functional, and economic obsolescence.  They tend to be in less desirable areas they may not look very pretty, however, they normally have lower risk and can accommodate start-ups that need lower occupancy costs. 

 

 

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FOR SALE: The Heart of Downtown Atlanta

Author: Re'Nauta Bell
Categories: Atlanta Market News,Downtown Atlanta,Market Insights,My Posts

Downtown Atlanta is shaking some trees

I heard about the sale of the CNN Center last night and I cannot stop thinking about it!  The CNN Center, located in Atlanta, Georgia, is the headquarters for CNN and other WarnerMedia companies around the world. WarnerMedia, deeply rooted in the Atlanta culture, made the bold decision to sell the CNN Center and relocate operations to its newly renovated Techwood center. The change will not be immediate, and employees will remain at their present location for quite some time. This makes sense considering WarnerMedia unveiled a commissioned mural portrait of Turner at the building park late last year.

WarnerMedia plans to sell and lease back the CNN Center for at least five years in an effort to raise capital.  Desroches has been working for some time to determine the highest and best use of the CNN Center and, he and his team, have ultimately decided the best course of action is to sell.  Furthermore, many of CNN’s most popular, have moved to New York City.

 

Only time will tell…

Opened as the Omni Complex in 1976, the CNN Center has been a tourist attraction for decades, providing behind-the-scenes tours that allow an inside look at how live broadcasts are created and transmitted globally. CNN has occupied this building since 1987, when Ted Turner moved the network from the original Techwood campus. The center featured the Omni Hotel and a large food court and gift shop.  On May 29th, protests over George Floyd’s death at the hands of police turned violent, resulting in damage to the exterior of the building and some part of the interior. The famous CNN sign, located at one of the main entrances, was damaged too but was fixed the next day.

It may seem that the protests sparked the decision to sell, and although the announcement was made only one month after the initial damage, that’s not the case. The decision to sell the property was made to cut costs has been in the works for years.  The plan was set in motion after AT&T purchased Time Warner. Perhaps rioting and disruptions were unpleasant catalysts setting the plans into immediate action, or it was initially been projected for this time frame. Pascal Desroches, CFO of WarnerMedia, suggests that the existing CNN Center could be repurposed from an office building to have more emphasis on retail and mixed-use.  That could be an amazing addition to the downtown submarket.

Over its 30+ year presence in Atlanta, the CNN Center has had a major impact on the city.  Just a few years ago, in honor of the founder, the road that runs in front of the building was renamed “Ted Turner”. While they aren’t turning their back on the city, the move will displace a significant number of WarnerMedia’s 6,000 Atlanta personnel.  Because of the ongoing pandemic, we probably won’t see the effects of the relocation for quite a while. Who knows?  The move may very well be for Atlanta’s benefit.  Only time will tell.

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