What is Rentable & Usable Square Footage?
As a tenant looking for an apartment in Manhattan, you may walk into one that is quoted at 600 square feet. In the event of residential units, the square footage quoted is often the actual square footage of the unit. However, that is not the case in the Manhattan OFFICE market. When it comes to New York City office space, square footage is quoted by rentable square footage. This is a number which accounts for the true square footage that you can measure within your space (usable square footage) PLUS a portion of the common areas within the building that all the tenants share. These common areas include the lobby, the elevators, hallways, etc.
The percentage of space that is added to the actual square footage is called the loss factor. It is often calculated by the following equation:
Loss Factor = (Rentable Area – Usable Area) / Rentable Area
At this present time in the market, a unit on a multi-tenanted floor (meaning that there are many tenants on a floor versus one tenant that occupies the entire floor) may have a loss factor of about 30-35%. This means that if you are to search for 1000 rentable square feet of office space, you should keep in mind that when you walk into the space, you will most likely see that the unit is 30-35% smaller than 1000 rentable square feet.
As mentioned before, square footage that is accounted after you deduct the loss factor is called the usable square footage. This is important to know since very often a new tenant will miscalculate how much square footage he/she actually needs. I often receive a phone call from a tenant saying they will need 1000 square feet. I then explain to them that 1000 square feet of office space will most likely measure to about 700 true square feet (usable square footage). They then realize that their initial measurements are too small and they need to adjust their parameters and search for a larger space. This is important to note since the larger the space, the more you may need to pay in rent.
My suggestion to any tenant is to speak with your broker in detail about the number of employees your space will contain as well as the build out you require in order to determine the amount of space you may truly need. Also, if you want to gain a better sense of how much rentable square footage you will need, please refer to my free space calculator which can do the work for you.