What is a buildings core factor and why should you care?
First things first. Let’s get a few definitions down. I have simplified these definitions, there are some nuances which I will not go into here. If you require a deeper understanding, BOMA, the Building Owners and Managers Association is the generally accepted authority on space measurement. Most quality leases will reference BOMA standard for calculating square footage.
Usable Square Feet:
The usable square footage (USF) is the actual space a tenant will use to conduct business. In essence, this is the space within your suite.
The common area, are those areas of the building that are available for all the occupants. Areas such as the main and elevator lobbies, public restrooms, janitor closets, electric and mechanical rooms, common phone closets and loading dock. Collectively these areas make up the common area.
Generally expressed as a percentage of the difference between the Usable and the Rentable Area of the building. This core factor is sometimes referred to as the Load Factor and can be expressed as a multiplier 1.15 or a percentage 15%.
Rentable Square Feet:
The rentable square footage (RSF) is the usable square footage plus the pro-rata share of the common area.
How do we use this information to in determing the best value?
A building with a total square footage of 115,000 which is made up of 15,000 square feet of common area and 100,000 square feet of usable area you have a 15% core factor calculated as:
115,000 RSF/100,000 USF = 1.15 or 100,000×1.15=115,000 RSF or
Let’s say you wanted to lease space in the above building “A” with its 15% core factor. You have a proposal from the Landlord for 10,000 RSF at $30.00 per square foot. This would be an annual rent of $300,000.00. Your usable square footage is 10,000/1.15=8,695.65 USF. Your annual rent on a usable basis is $300,000/8,695.65=$34.50 per USF. A short cut to this is $30.00×1.15=$34.50.
Now you have a competing proposal from building “B”, 10,000 RSF also at $30.00 per square foot only with a 13% core factor. 10,000/1.13=8,849.56 USF; $30×1.13=$33.90 per USF verses building “A” at 8,695.65 USF; $34.50 per USF. All other things being equal building “B” is the better value, netting you 153.91 additional usable square feet, 8,849.56-8,695.65=153.91. Depending on the layout, this could mean an extra three 6×8 workstations or one additional office or needed storage.
Many factors go into making a determination on where to lease. Building “A” may be the more desirable location or the larger core factor may include a common conferencing center, allowing you to forgo a large meeting room within your USF or a may be a fitness center, allowing you to drop the gym membership etc.
A quality broker will help you evaluate the space and determine the best value for your needs.
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