As you’re looking for commercial space to lease, it’s common to see the terms rentable square feet (RSF), or usable square feet (USF), in the listing’s details or marketing materials.
Not sure of the difference between the two terms? In this article we’ll go through these terms, and you’ll learn what they mean for you as a tenant when you lease commercial space.
First, let’s discuss usable square feet.
What is Usable Square Feet?
Usable square feet is the space that is occupied by you as a tenant, typically equal to the size of your suite. This does not include deductions for columns or other structural elements of the space.
It’s common for tenants to measure a space from the inside of all walls of the space, and as a result, calculate a total square footage that is lower than the landlord’s measurements. It’s recommended to hire an architect or space planner to help ensure a more accurate measurement.
In the example above, the whole floor totals 100,000 square feet. However, your usable square feet is only 25,000. This is also known as leasable square feet.
Usable square feet should not include any common areas of the building such as hallways, restrooms, cafeterias etc.
Usable square feet may differ from rentable square footage which accounts for a tenant’s share of common areas.
What is Rentable Square Feet?
Rentable square feet (RSF) is the amount of space you are responsible for paying as a tenant on a monthly basis.
The rentable square feet (RSF) includes the space you occupy as a tenant and can include your share of common areas in the building, such as lobbies, public corridors and restrooms.
This is commonly found in office buildings, co-working spaces, retail centers, and other spaces where common areas are shared.
Here’s Why Tenants Pay Rent For Common Areas
If this is a common or shared area, why are you being charged rent for the space?
Think of it this way, the property owner has to pay for the entire building. Common areas are used by all tenants without directly being leased by any of them, which is why you are paying your share, or ‘pro rata’ share.
How is it calculated?
Your rentable square feet is calculated by your total usable square feet (USF), and the shared percentage of common areas in relation to the whole building.
As an example, your USF is 10,000 square feet. Let’s say this accounts for 7% of all usable square footage in the building. 7% is your ‘Pro Rata share’.
Now, the total square footage of common areas is 15,000 square feet. Your share of the common areas is 7%. This results in your Pro Rata share of 1,050 square feet.
As a result your total RSF is now 11,050 square feet as it factors in your usable square feet and your share of the common areas.
Explaining The Load Factor
An alternative way a property owner can assess your rentable square feet is using the load factor. The load factor is based on the common area found in the building, and is calculated by dividing the building’s total rentable square feet by the total usable square feet.
Let’s imagine the total rentable square feet is 110,000 and there is 100,000 usable square feet of space (because 10,000 square feet is common areas).
This results in a load factor of 10%.
Now as an office tenant, you occupy 25,000 usable square feet. The property owner may have you responsible for 110%, or 27,500 rentable square feet, when you calculate the 10% load factor in.
Other Things To Know About Rentable Square Feet
In multi-tenant buildings, owners may charge you base rent on rentable square footage and/or collect common area maintenance (CAM) reimbursements, based on rentable square footage.
Since you benefit from the use of the common areas as a tenant, those areas also incur expenses and maintenance costs. It’s not uncommon for property owners to request you pay your ‘pro rata share of expenses.
The two terms usable square feet, and rentable square feet can be confusing. However, they have different meanings and can impact your commercial lease payments and responsibilities as a tenant.
We hope this article was helpful in explaining the differences between the two terms. Do you want to learn more about commercial real estate leasing? Read our article: 14 Questions About Leasing Commercial Real Estate, Answered.