Net Leasable Area (NLA)
Net Leasable Area (NLA) refers to the portion of a building that can be leased to tenants and upon which rental payments are based. Unlike gross leasable area (GLA), NLA excludes common areas, structural components, and space designated for building services and equipment. Determining the NLA is essential for property owners and managers in setting rental rates and evaluating the revenue potential of the property.
Examples
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Office Building: A 10-story office building has a total floor area of 30,000 square feet. Each floor has 3,000 square feet, of which 500 square feet are used for hallways, elevators, and restrooms. Therefore, the NLA is 25,000 square feet (30,000 square feet total minus 5,000 square feet of common areas).
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Shopping Mall: A shopping mall spans an area of 100,000 square feet. The food courts, hallways, and common areas take up 20,000 square feet, leaving an NLA of 80,000 square feet that stores can be leased.
Frequently Asked Questions (FAQs)
What is the difference between Net Leasable Area (NLA) and Gross Leasable Area (GLA)?
- NLA excludes common areas and nonsalable square footage, focusing solely on rentable space.
- GLA includes entire floor space that could potentially be leased, counting stairwells, hallways, and other common areas unless stated otherwise.
Why is Net Leasable Area important for landlords?
NLA determines the amount of space from which rental income can be derived, significantly influencing leasing strategies, property valuation, and investment performance.
How is NLA calculated?
Generally, NLA is calculated by deducting the area of common spaces from the building’s gross floor area. Precise methods can vary by region and specific lease agreements.
Can NLA vary for the same building?
Yes, NLA might vary if a part of the building is reconfigured or repurposed, altering the ratio of rentable to common space.
How does NLA impact rental rates?
Rental rates are often quoted per square foot of NLA, ensuring tenants are only paying for the space they exclusively use and manage.
Related Terms
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Gross Leasable Area (GLA): The total floor area available to be leased, including both common areas and exclusive tenant spaces.
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Common Area: Portions of a building not leased but shared among tenants, typically including lobbies, hallways, restrooms, and atriums.
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Usable Area: The actual area occupied by tenants, including private or semi-private spaces but excluding major common areas.
Online Resources
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BOMA International: BOMI International offers courses on building area measurement standards and property management best practices.
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NAIOP: NAIOP Commercial Real Estate Development Association provides various resources on leasing and real estate terms.
References
- “Commercial Real Estate Analysis and Investments” by David M. Geltner and Norman G. Miller
- “Property Management Kit For Dummies” by Robert S. Griswold
Suggested Books for Further Studies
- Real Estate Finance and Investments by William B. Brueggeman and Jeffrey D. Fisher
- The Complete Guide to Real Estate Finance for Investment Properties by Steve Berges
