Net Leasable Area (NLA)

Definition

Net Leasable Area (NLA) is the total space in a commercial property that is available for leasing to tenants. It excludes non-leasable areas such as common corridors, lobbies, stairwells, restrooms, and maintenance rooms. NLA is a pivotal figure for property managers and investors, helping them forecast prospective rental income and assess the economic performance of the property.

Examples

Office Building: In a multi-tenant office building, the Net Leasable Area includes individual office suites rented out to businesses but excludes shared hallways and communal break rooms.
Retail Shopping Complex: For a retail shopping center, the NLA comprises individual store spaces leased to retail businesses, not including common walkways and food court areas.
Industrial Warehouse: In an industrial property, the NLA includes rentable sections of warehouse space while excluding loading docks and common storage areas.

Frequently Asked Questions

Q: How is NLA different from Gross Leasable Area (GLA)? A: GLA includes the total rentable space within a building, incorporating both leasable and non-leasable areas, while NLA only accounts for the rentable areas designated for tenant use.
Q: Why is NLA important for calculating rental income? A: NLA provides an accurate measurement of the space that can generate rental revenue, aiding investors and landlords in determining fair market rental rates and forecasting potential income.
Q: Can NLA change over time? A: Yes, modifications to the building layout or usage, along with updates in tenancy or renovations, can affect the NLA.

Gross Leasable Area (GLA): This includes the total area available for leasing, encompassing both rentable and non-rentable spaces.
Common Area Maintenance (CAM): Charges levied on tenants typically include upkeep and maintenance of shared or common areas within the property.
Usable Area: The space within a building that can be occupied but does not include structural columns or mechanical areas.
Rentable Area: Similar to NLA but may include non-leasable space as prorated among tenants.

Online Resources

BOMA International: The Building Owners and Managers Association (BOMA) offers various guides and standards on building measurement, including NLA.
NAIOP Research Foundation: This foundation provides numerous research reports and resources related to commercial real estate and the measurement of leasable spaces.
CoStar: CoStar is a leading provider of commercial real estate information and analytics and offers extensive data on leasable spaces.

References

“The Dictionary of Real Estate Appraisal” by The Appraisal Institute
“BOMA International Office Standard: Methods of Measurement”

Suggested Books for Further Studies

“Understanding Real Estate: A Guide for Developers and Investors” by Austin Jaffe and C. David Sirmans This book covers essential concepts in real estate, including methodology for calculating NLA.
“Commercial Real Estate Investing: A Creative Guide to Creating Value” by Jim Hasenfus, Florence Kane, and Lawrence Tuller Focuses on investment strategies and property valuation, including tools for maximizing rental income from NLA.
“Property Management Kit For Dummies” by Robert S. Griswold Provides a comprehensive resource on managing properties, with sections dedicated to understanding and utilizing NLA for optimal income.

Real Estate Basics: NLA Fundamentals Quiz

### What does Net Leasable Area (NLA) specifically exclude? - [ ] Areas occupied by tenants - [x] Common corridors, lobbies, and restrooms - [ ] Stacked machinery areas - [ ] Tenant service areas > **Explanation:** Net Leasable Area (NLA) excludes non-leasable spaces such as common corridors, lobbies, and restrooms, focusing only on the areas that generate rental income. ### What is the significance of NLA in property management? - [ ] It measures the total land owned by the property. - [x] It helps in estimating potential rental income. - [ ] It determines the total building height. - [ ] It includes land value assessments. > **Explanation:** NLA is crucial for property managers as it helps in estimating potential rental income by measuring the space that can be rented out to tenants. ### How is NLA different from Gross Leasable Area (GLA)? - [ ] NLA includes all building space, GLA excludes rentable spaces. - [ ] NLA and GLA are essentially the same measurement. - [x] NLA measures space available for tenant leasing; GLA includes both rentable and non-rentable areas. - [ ] NLA is for residential properties only, GLA is for commercial. > **Explanation:** NLA measures only the tenant-leasable space, while GLA includes both rentable and non-rentable areas of the property. ### In what type of property is Net Leasable Area most commonly used? - [ ] Residential homes - [x] Commercial properties such as office buildings, retail complexes, and industrial warehouses - [ ] Agricultural lands - [ ] Multi-family residential units > **Explanation:** NLA is most commonly used in commercial properties such as office buildings, retail complexes, and industrial warehouses to gauge available rental space. ### Which element is NOT part of the Net Leasable Area? - [ ] Tenant office space - [ ] Individual retail store - [ ] Rentable warehouse space - [x] Lobby and elevator areas > **Explanation:** Lobby and elevator areas are considered common spaces and are not part of the Net Leasable Area, which only includes tenant-leasable spaces. ### Why would the NLA metric be adjusted? - [ ] Due to seasonal changes - [ ] To reflect changes in local legislation - [x] Due to alterations in building layout or renovations - [ ] NLA remains constant and unadjusted > **Explanation:** The NLA metric may be adjusted due to alterations in the building layout or renovations, which can change the amount of leasable space available. ### What does CAM stand for, and how is it related to NLA? - [ ] Common Area Mechanisms; includes engineering and maintenance systems - [ ] Commercial Area Management; involves tenant negotiations - [x] Common Area Maintenance; charges shared among tenants for maintenance of non-leasable areas - [ ] Customer Access Modules; tenant access systems > **Explanation:** Common Area Maintenance (CAM) charges are fees shared among tenants that cover the upkeep of non-leasable, shared common areas, which are distinct from the NLA. ### Which type of area is NOT included when calculating NLA? - [ ] Leaseable tenant space - [ ] Space occupied by tenant-branded facilities - [x] Shared restrooms and janitor closets - [ ] Standalone rentable offices > **Explanation:** Shared restrooms and janitor closets are not included in calculating NLA as they are considered common, non-leasable areas. ### Who generally benefits from knowing the NLA of a property? - [ ] Residential tenants only - [ ] Landscaping companies - [x] Property managers and commercial real estate investors - [ ] Security firms > **Explanation:** Property managers and commercial real estate investors benefit from knowing the NLA as it helps them in budgeting, determining rental rates, and forecasting revenue. ### How can NLA impact the rent computation? - [ ] By decreasing tax liability - [ ] Increasing lobby and corridor expanses - [x] By providing a basis for calculating lease charges based on usable tenant space - [ ] Altering property insurance costs directly > **Explanation:** NLA can impact rent computation by serving as the basis for calculating lease charges, ensuring tenants are charged fairly based on the amount of rentable, usable space available to them.