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Office space is leased by the square foot, and too often, tenants go to great lengths to negotiate the best possible rate per square foot without considering how the square footage is determined for the particular building.
The “gross-up factor,” which is the proportionate allocation of common area to a tenant’s office space, and the measurement standard that the Landlord uses for the building determine the size of the office.
On a lease transaction of 10,000 rentable square feet, a tenant paying $20.00 per rentable square foot in a building with a 10% gross is actually paying closer to $22.00 per usable square foot because they occupy 9,090 square feet.
A tenant paying $20.00 per rentable square foot in a building with a 20% gross up is paying ~ $24.00 per usable square foot because they occupy only 8,333 sq. ft. of usable square feet.
Over a five-year term, that adds up to a $100,000.00 difference. Also, consider that when operating costs are part of the equation, the gap widens because they are also charged on the rentable area of the office space.
To make a real “apples to apples” comparison of office space alternatives, tenants need to understand the difference between rentable and usable square footage in each office suite.
To learn more about how landlords determine the rentable area of a suite and why it is so important when considering new office space, go to: https://www.calgaryofficespace.ca/tenant-information/the-real-cost-of-your-office-lease-when-is-a-thousand-square-feet-not-a-thousand-feet/
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