Methods of Quoting Office Floor Area
There are several different ways in which office building owners provide prospective tenants or purchasers with quotes of the area in an office space to be rented or purchased. In renting or purchasing office space a prospective tenant or purchaser should inquire as to the method an owner used to quote the area of an office space or building. Only through such an inquiry can a prospective tenant or purchaser understand what they are actually getting and be able to compare that on an apples to apples basis with other alternatives.
Alternatives Methods of Measuring Floor Area
Construction Gross Area - The larger measure of the two gross areas, it includes the area defined as Exterior Gross Area as well as other areas that have a structural floor, or are covered by a roof or canopy, that are typically unenclosed but within the building perimeter. Construction Gross Area can be an appropriate measure of area upon which to base an estimated construction cost or for valuation using the replacement value approach of appraisal. Accurate construction cost estimating and replacement cost valuation should consider fully enclosed and finished space differently than unenclosed space.
Exterior Gross Area – The total floor area contained within the outside surface of the exterior enclosure, or wall, of a building. Typically unenclosed areas are excluded. Exterior Gross Area can be an appropriate measure of area for use in planning and design of buildings with respect to zoning floor area ratios and for real estate tax assessment purposes.
Usable Area – The terms Rentable Area and Usable Area do not necessarily have the same meaning although building owners and tenants may use them interchangeably. When using the two terms you should have a clear understanding of the potential difference in their meaning particularly from one office building to another. There can be slightly different manners of measuring or defining Usable Area. One method defines Usable Area as the area of an office building on the interior side of the exterior wall of the building, the Usable Area also extends to the middle of a partition wall between adjacent tenants, in buildings with an interior public hallway the Usable Area is measured to the side of the hallway wall which is interior to the office space being measured. Usable Area excludes any vertical penetrations of the floor of the office space such as ventilation chases, plumbing chases, elevator shafts and stairwells. The Usable Area of an office space includes areas taken up by structural columns.
Rentable Area –The basic concept of rentable area is to allocate to the Usable Area of an office space a share of the office buildings common areas. Common areas can include public lobbies and hallways outside of the individual tenant office spaces. Common Areas also include public bathrooms, janitorial closets, electrical closets and telephone closets and other such spaces for the benefit of the tenants of the office building. The concept of Rentable Area excludes any floor penetrations such as elevator shafts, stairwells, ventilation chases and plumbing chases.
There are basically two different methods of developing or defining the Rentable Area of an office building. One method looks at the office building as a whole and then allocates the common areas of the entire building uniformly to each Usable Area of office space regardless of the floor on which it is located. An example of the significance of this method is that in a multistory office building a share of the area of the entrance lobby, even though it is on typically the first floor, is allocated to all of the Usable Areas of office space regardless of the floor it is on.
A second method of defining Rentable Area is to go floor by floor of the building and allocate to the Usable Area on that floor only the common areas on that floor. Thus the area of the entrance lobby on the first floor is only allocated to the Usable Area on the first floor.
Knowledgeable office building owners will know the R/U Factor for their office building. The R/U Factor is the ratio of the Rentable Area to the Usable Area of the office building. It is a measure of how much common area space, or public space, a tenant is paying for in order for a tenant to obtain a given amount of Usable Area which the tenant will actually occupy in the course of its business. R/U Factors can range as low as 110% to a high of about 130%. At 110% a tenant is paying for ten percent more space in Rentable Area than the tenant is actually occupying in Usable Area. At 130% the tenant is paying for thirty percent more space in Rentable Area than the tenant is actually occupying in Usable Area.
To compare apples to apples from one office building to another, a prospective tenant must figure out the actual Useable Area that the tenant will occupy in each office building and the total monthly or annual rent each office space will cost. By dividing the annual rent by the Usable Area a tenant can then determine fairly which office space provides the better annual rent per Usable Area.