Most office space today is leased by the square foot. Even
though tenants will go to great lengths to negotiate the best
rate per square foot, they often have little understanding
of how the square footage is determined, which can be as important
as the rate itself.
In order to simplify and standardize the measurement of office
space, the Building Owners and Managers Association International
("BOMA") has adopted a uniform standard for the
measurement and leasing of office space (the "BOMA Standard").
Although no one is required to use the BOMA standard, most
major landlords do and most leases specify that space shall
be determined in accordance with the BOMA Standard.
The BOMA standard relies on two important definitions: "usable
area" and "rentable area." In order to understand
how space is determined under the BOMA Standard, it is necessary
to understand these two terms.
Usable area can generally be considered as the private space
that tenants can use to house their own personnel, furniture
and equipment. It is measured from the office side of the
common corridor walls, the inside of exterior building walls,
and the middle of partition walls separating the tenant's
space from space occupied by other tenants. It does not include
restrooms, elevator shafts, fire escapes, stairwells, electrical
and mechanical rooms, janitorial rooms, elevator lobbies,
or public corridors (for example, a corridor leading from
the elevator lobby to the entrance of a tenant's office).
Rentable area is more inclusive—it
consists of all space except for the elevator shaft and fire-escape
stairwell. It is measured from the inside surface of exterior
building walls and the office side of the walls of major penetrations.
Unlike usable space, rentable space includes restrooms, electrical
and mechanical rooms, janitorial rooms, elevator lobbies and
Rates are quoted on the basis of rentable area. To determine
the amount of rentable area leased by a particular tenant,
a ratio must be established (sometimes known as a "load
factor") so that each tenant will pay his proportionate
share of the elevator lobbies, restrooms, corridors, and other
common areas not included within each tenant's usable area.
This ratio, or load factor, is determined by dividing the
total rentable area by the total usable area. This will usually
result in a figure of about 1.10 to 1.15. To determine a tenant's
basic rent, his usable area is multiplied by the load factor,
and the result (which is the rentable area) is then multiplied
by his rate per square foot.
It is important for the tenant to compare rates on the basis
of usable space, because that is the private space the tenant
will have available for its business. An inefficient building
with a high load factor will cost the tenant more per usable
square foot than he may realize. There are significant differences
in the load factor among buildings, so the cost-conscious
tenant should make sure he understands his rate per usable
square foot as well as per rentable square foot.
A few other points about the BOMA Standard are worth noting:
- The BOMA Standard is now figured on the entire building.
Formerly, it was figured on a floor-by-floor basis. Today,
ground floor lobbies, rooftop mechanical rooms, and mechanical
rooms serving more than one floor (regardless of where located)
are considered when calculating the rentable and usable
areas. As a result, each floor's load factor is the same.
This change has the effect of increasing the load factor,
which allows landlords to collect more total dollars while
charging the same nominal rent.
- The "load factor" under the BOMA Standard should
not be confused with the common area expense allocation
for such items as utilities, landscaping, window cleaning,
insurance and property taxes. These expenses are often passed
through to the tenant (in whole or in part) in proportion
to each tenant's rentable space; however, the share payable
by any given tenant is calculated strictly in accordance
with the lease provisions and is completely separate from
the load factor. Often, there is a "base year,"
generally the first year of the lease, where the landlord
pays all operating expenses. In subsequent years, the tenant
pays only his share of any increases in operating expenses
over the base year.
- The BOMA Standard is intended to apply only to office
space, and has no application to industrial, retail, or
- Structural columns and minor vertical penetrations for
such things as plumbing and telephone lines are not deducted
from either usable or rentable space.
If you are leasing a significant amount of space, have your
space physically measured by an independent professional before
you sign your lease in order to verify your usable space and
the load factor. Errors are common, and can add up to huge
dollar amounts over the life of a lease.
For a complete copy of the BOMA Standard, contact the Building
Owners Managers Association International, 1201 New York Avenue,
N.W., No. 300, Washington, D.C. 20005.
A tenant quoted an annual rate of $20.00 per rentable square
foot is paying $22.00 per usable square foot in a building with
1.10 load factor, and $23.00 in a building with a 1.15 load
factor. This represents a $50,000.00 difference for a 10,000
square foot area over the life of a 5-year lease.
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