Net Rentable Area (NRA)

January 1, 1 5 min read Net Rentable Area Commercial Real Estate Leasing Tenants Interior Space Property Management Income Potential Usable Space

Net Rentable Area (NRA) refers to the usable space available for lease to tenants in a commercial property, excluding certain areas such as common areas, elevator shafts, and emergency stairwells. This metric is essential for determining the true income potential of a property.

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Definition

Net Rentable Area (NRA) or Net Leasable Area (NLA) encompasses the total usable area within a property available for leasing to tenants. This includes office spaces, retail units, and other rentable spaces but excludes common areas such as corridors, lobbies, restrooms, and utility rooms. NRA is critical for calculating rental income, as rates are typically applied to the rentable square footage to assess potential earnings from tenants.

Examples

Office Building: In a 100,000 square foot office building, the Net Rentable Area could be 80,000 square feet if 20,000 square feet are allocated to hallways, restrooms, and lobbies.
Retail Space: A shopping mall with a total area of 500,000 square feet might have only 350,000 square feet as NRA, taking into consideration the spaces reserved for food courts, event areas, and common walkways.

Frequently Asked Questions (FAQs)

What is the difference between Net Rentable Area and Gross Rentable Area?

Net Rentable Area refers to the actual rentable space available to tenants, excluding common areas. Gross Rentable Area (GRA) includes all areas within the building, both rentable and non-rentable spaces.

Why is Net Rentable Area important in commercial real estate?

Net Rentable Area is crucial as it directly impacts the calculation of rental income and property valuation. Higher NRA typically means higher potential rental revenue.

How is Net Rentable Area calculated?

NRA is calculated by subtracting non-leasable spaces (like common areas, mechanical rooms, etc.) from the Gross Building Area. Measurements are usually taken from the exterior walls, including internal partitions of tenant spaces.

Can Net Rentable Area change over time?

Yes, modifications to a building’s layout—such as converting common areas into leasable space or repurposing some tenant areas for common use—can affect the Net Rentable Area.

Gross Leasable Area (GLA): The total floor area designed for tenant’s exclusive use, which includes the Net Rentable Area plus the tenant’s proportionate share of any common areas.
Usable Square Footage (USF): The portion of a building’s floor that the tenant can actually inhabit, typically excluding walls, columns, and other demising constructions.
Common Areas: Shared parts of a building, such as lobbies, corridors, and washrooms, which are not included in the rentable area calculations.

Online Resources

References

The Property Management Manual, Fourth Edition, by Robert C. Kyle
Real Estate Finance & Investments: Risks and Opportunities by Peter Linneman
Investing in REITs: Real Estate Investment Trusts by Ralph L. Block

Suggested Books for Further Studies

Property Valuation by Peter Wyatt
Real Estate Investment: A Strategic Approach by David M. Geltner
Commercial Real Estate Analysis and Investments by David M. Geltner and Norman G. Miller

Net Rentable Area Fundamentals Quiz

### What is excluded from the Net Rentable Area? - [ ] Office spaces - [x] Common areas - [ ] Retail units - [ ] Tenant storage rooms > **Explanation:** Common areas, like hallways and restrooms, are excluded from the Net Rentable Area calculations. ### What is another term commonly used interchangeably with Net Rentable Area? - [ ] Gross Rentable Area - [ ] Usable Square Footage - [x] Net Leasable Area - [ ] Common Area > **Explanation:** Net Leasable Area is another term often used to describe Net Rentable Area. ### Why is the Net Rentable Area significant for property owners? - [x] It helps in calculating rental income. - [ ] It includes parking spaces. - [ ] It represents the total building area. - [ ] It encompasses outdoor spaces. > **Explanation:** Net Rentable Area is significant because it helps property owners calculate rental income based on the space available to lease. ### How can the Net Rentable Area of a property change? - [ ] Adding new floors - [ ] Painting the exterior - [ ] Modifying the use of interior spaces - [x] Converting common areas into leaseable space > **Explanation:** The Net Rentable Area can change if common areas are converted into leasable space or vice versa. ### When calculating NRA, from what point are measurements usually taken? - [ ] From the interior walls - [x] From the exterior walls - [ ] From the property boundary - [ ] From the ceiling height > **Explanation:** Measurements are usually taken from the exterior walls, including internal partitions of tenant spaces, to calculate the Net Rentable Area. ### Which area is NOT considered as part of the NRA? - [x] Mechanical rooms - [ ] Tenants' Office space - [ ] Retail spaces - [ ] Private restrooms within tenant space > **Explanation:** Mechanical rooms and other utility spaces are not part of the NRA. ### Are tenant-exclusive washrooms considered part of NRA? - [x] Yes - [ ] No > **Explanation:** Tenant-exclusive washrooms are considered part of the NRA if they are within the leased premises. ### Which rule helps in establishing international standards for measuring commercial space? - [ ] Interior Space Rule - [ ] Building Measurement Rule - [ ] Lease Outline Rule - [x] BOMA Standards > **Explanation:** The Building Owners and Managers Association (BOMA) Standards help establish international guidelines for measuring commercial space. ### What type of area does Gross Leasable Area include that NRA does not? - [ ] Parking spaces - [ ] Outdoor activities areas - [x] Common area proportion - [ ] Emergency exits > **Explanation:** GLA includes the Net Rentable Area plus the tenant's proportionate share of common areas. ### What measuring metric is most impacted by interior structural changes? - [ ] Property boundary measurements - [ ] Building height measurements - [x] Net Rentable Area - [ ] Parking lot measurements > **Explanation:** Interior structural changes directly impact the calculation of the Net Rentable Area.

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