The leasing of commercial office space can be a complicated process. In negotiating square footage and rental rates, one of the more challenging things that commercial real estate brokers work with - and that tenants must understand before their lease will make sense to them - is the difference between rentable and usable space. Based on the differences in each, a commercial real estate broker will calculate and negotiate lease rates, so it is essential for those who are actually paying the bill to understand what they are getting for their money.
Different Types of Building Space
Calculating the cost of office space requires an understanding of the concept that there are different types of space that tenants pay for, and at different rates. These spaces include rentable space, usable space and common space. In order to determine the total cost of commercial office space, and to be able to negotiate leases based on the different types of spaces, tenants and their commercial real estate brokers must know how much of each space their total space includes.
What Is Rentable Space?
Any good commercial real estate broker knows that rentable space is easily defined as the total space in a building that can be rented. This includes all space allocated for individual tenants, all common spaces, and other spaces like storage, cleaning closets, restrooms, electrical and phone rooms, elevators, stairwells and basically any floor space that someone can stand on. This is all considered rentable building space.
What Is Usable Space?
Usable space is defined as the total square footage a tenant rents, that is sectioned off specifically for them to occupy. This includes any accessory areas like restrooms, janitorial closets, and stairwells or elevators - if those structures are within the area used by that tenant. The difference between rentable and usable space is that usable space applies to individual tenants, while rentable space applies to the entire building, and all the usable and common space within it.
Factoring in Common Areas
Where many tenants become confused when determining their costs is in failing to address common areas. Common space is any and all areas within a building that are used by multiple tenants - such as lobbies, restrooms, stairways and other areas that are outside of the usable space, but accessible to all. The amount of common space in a building is figured by percentage, and all tenants in the building pay for partial use of that space. This figure is part of the monthly lease fee, and is in addition to the fee paid for useable square footage.
The importance in knowing what the definitions of these different spaces are, is that the formulation of leasing fees is not as simple as multiplying an amount by number of square feet of usable commercial office space. Commercial real estate brokers must determine the percentage of common areas per building, and how much each tenant is responsible to pay for, to correctly calculate lease fees. It is also important that tenants work with a commercial real estate broker who can ensure that landlords understand the same definitions for these spaces, so there are no discrepancies when configuring lease rates that include common area fees!