Rentable Area

Definition

Rentable Area, also known as Net Leasable Area (NLA), is the total square footage of a building for which a landlord charges rent to tenants. It includes the private areas primarily occupied by tenants (tenant area) as well as a pro-rata share of common areas such as lobbies, hallways, and restrooms that serve all occupants of the building. Rentable Area is critical in determining the total rent a tenant must pay and is a key metric in commercial real estate leases.

Examples

Office Building: In an office building with a total floor space of 100,000 sq ft:
- Private tenant spaces: 80,000 sq ft.
- Common areas (lobbies, public restrooms, hallways): 20,000 sq ft.
- Rentable Area calculated would be 100,000 sq ft.
Retail Complex: In a retail complex where a store occupies 1,500 sq ft:
- Tenant’s private retail space: 1,500 sq ft.
- Pro-rata share of common areas: 300 sq ft.
- Rentable Area in this scenario would be 1,800 sq ft.

Frequently Asked Questions

Q1: How is Rentable Area different from Usable Area? A1: Usable Area refers to the space a tenant can actually use and furnish for their operations, excluding common areas. On the other hand, Rentable Area includes both the Usable Area and a share of common areas.

Q2: What common areas are typically included in the Rentable Area calculation? A2: Common areas may include lobbies, restrooms, corridors, stairwells, and other shared amenities like cafeterias or fitness centers.

Q3: Is the Rentable Area the same in all buildings? A3: No, the method of calculating Rentable Area can vary depending on the industry standards or lease agreement specifics of the building.

Q4: Why is Rentable Area important in commercial leases? A4: Rentable Area is essential because it directly influences the rental rate a tenant will pay, impacting lease negotiations and financial planning.

Usable Area: The actual area a tenant can use within a rented space, excluding common areas.
Common Area Maintenance (CAM): Costs associated with maintaining shared spaces in a building, often proportionately divided among tenants.
Efficiency Factor: A ratio that compares the Usable Area to the Rentable Area, reflecting how efficiently a building’s space is used.
Load Factor: Equivalently used as the “Add-On Factor,” this is a ratio by which the Usable Area is increased to account for the tenant’s share of common areas.

Online Resources

References

BOMA International. “The Gross Areas of a Building: Methods of Measurement.”
IFMA’s Guide to Facility Management - Chapter on Space Utilization Metrics
NAIOP Research Foundation. “Best Practices in Office Lease Negotiation.”
SIOR Commercial Real Estate Standards - Office Building Performance Metrics.

Suggested Books for Further Studies

“Commercial Real Estate Analysis and Investments” by David M. Geltner and Norman G. Miller.
“BOMA 2017: Office Buildings - Standard Methods of Measurement (ANSI/BOMA Z65.1-2017)”
“Property Management” by Robert C. Kyle, Florida.
“Leasing NYC” by Alan M. Di Sciullo, Philip J. Giusto.

Real Estate Basics: Rentable Area Fundamentals Quiz

### What does Rentable Area include in a commercial building? - [ ] Only the private tenant areas - [ ] Only common areas - [x] Private tenant areas and a share of common areas - [ ] Mechanical rooms only > **Explanation:** Rentable Area includes both the private tenant areas and a pro-rata share of common areas used by all tenants, such as lobbies and restrooms. ### Rentable Area is also known as what? - [ ] Usable Area - [ ] Gross Square Footage - [x] Net Leasable Area (NLA) - [ ] Common Area > **Explanation:** Rentable Area is also known as Net Leasable Area (NLA), indicating the total space that can be leased and charged to tenants. ### Does Rentable Area influence overall rent a tenant pays? - [x] Yes, it directly determines the total rent. - [ ] No, it has no impact on rent. - [ ] It only affects utilities. - [ ] It only includes aesthetic conditions. > **Explanation:** Rentable Area significantly influences the total rent a tenant pays, as it comprises both the usable premises and a share of the building's common areas. ### Common areas that tenants share are part of: - [x] Rentable Area - [ ] Usable Area - [ ] Mechanical space - [ ] Exterior grounds > **Explanation:** Common areas like lobbies and shared restrooms are included in the Rentable Area, contributing to the overall space charged to tenants. ### The method of calculating Rentable Area is dictated by: - [ ] The tenant's industry - [ ] Building aesthetics - [x] Industry standards or lease agreements - [ ] Building height > **Explanation:** The method and specifics of calculating Rentable Area are generally dictated by widely-accepted industry standards or the specifics outlined in lease agreements. ### What does not generally count towards the Rentable Area? - [ ] Restrooms common to all tenants - [ ] Shared hallways - [x] Mechanical and utility rooms - [ ] Building entries > **Explanation:** Mechanical and utility rooms, which are necessary for building operation but not part of the common area shared for use by all tenants, typically do not contribute towards Rentable Area. ### Why is it important to understand the Rentable Area in a lease? - [x] It determines how much rent will be paid. - [ ] It determines loan eligibility. - [ ] It only affects the length of the lease. - [ ] It does not really matter. > **Explanation:** Understanding the Rentable Area is crucial because it determines the total rent the tenant is responsible for, impacting financial commitments. ### How does the Efficiency Factor relate to Rentable Area? - [ ] It describes mechanical efficiency. - [x] It is a ratio of Usable Area to Rentable Area. - [ ] It determines HVAC needs. - [ ] It measures outdoor space usage. > **Explanation:** The Efficiency Factor is a ratio that compares the Usable Area to the Rentable Area and indicates the proportion of space that is effectively usable. ### What type of space usually remains consistent regardless of Rentable Area? - [ ] Restrooms - [x] Mechanical rooms - [ ] Office space - [ ] Corridors > **Explanation:** Mechanical rooms, necessary for the building's operations, typically do not vary by calculation method and often are not included in Rentable Area. ### Rentable Area calculations can impact which of the following? - [x] Lease negotiations and rent determination - [ ] Property tax assessments - [ ] Exterior building design - [ ] Direct access to public transportation > **Explanation:** Rentable Area calculations directly influence lease negotiations and rent determination, impacting how much tenants pay for their space.