Most office space today is leased by the square foot. Even though tenants will go to great lengths to negotiate the best rate per square foot, they often have little understanding of how the square footage is determined, which can be as important as the rate itself.

In order to simplify and standardize the measurement of office space, the Building Owners and Managers Association International ("BOMA") has adopted a uniform standard for the measurement and leasing of office space (the "BOMA Standard"). Although no one is required to use the BOMA standard, most major landlords do and most leases specify that space shall be determined in accordance with the BOMA Standard.

The BOMA standard relies on two important definitions: "usable area" and "rentable area." In order to understand how space is determined under the BOMA Standard, it is necessary to understand these two terms.

Usable area can generally be considered as the private space that tenants can use to house their own personnel, furniture and equipment. It is measured from the office side of the common corridor walls, the inside of exterior building walls, and the middle of partition walls separating the tenant's space from space occupied by other tenants. It does not include restrooms, elevator shafts, fire escapes, stairwells, electrical and mechanical rooms, janitorial rooms, elevator lobbies, or public corridors (for example, a corridor leading from the elevator lobby to the entrance of a tenant's office).

Rentable area is more inclusive—it consists of all space except for the elevator shaft and fire-escape stairwell. It is measured from the inside surface of exterior building walls and the office side of the walls of major penetrations. Unlike usable space, rentable space includes restrooms, electrical and mechanical rooms, janitorial rooms, elevator lobbies and public corridors.

Rates are quoted on the basis of rentable area. To determine the amount of rentable area leased by a particular tenant, a ratio must be established (sometimes known as a "load factor") so that each tenant will pay his proportionate share of the elevator lobbies, restrooms, corridors, and other common areas not included within each tenant's usable area. This ratio, or load factor, is determined by dividing the total rentable area by the total usable area. This will usually result in a figure of about 1.10 to 1.15. To determine a tenant's basic rent, his usable area is multiplied by the load factor, and the result (which is the rentable area) is then multiplied by his rate per square foot.

It is important for the tenant to compare rates on the basis of usable space, because that is the private space the tenant will have available for its business. An inefficient building with a high load factor will cost the tenant more per usable square foot than he may realize. There are significant differences in the load factor among buildings, so the cost-conscious tenant should make sure he understands his rate per usable square foot as well as per rentable square foot.

A few other points about the BOMA Standard are worth noting:

1. The BOMA Standard is now figured on the entire building. Formerly, it was figured on a floor-by-floor basis. Today, ground floor lobbies, rooftop mechanical rooms, and mechanical rooms serving more than one floor (regardless of where located) are considered when calculating the rentable and usable areas. As a result, each floor's load factor is the same. This change has the effect of increasing the load factor, which allows landlords to collect more total dollars while charging the same nominal rent.
2. The "load factor" under the BOMA Standard should not be confused with the common area expense allocation for such items as utilities, landscaping, window cleaning, insurance and property taxes. These expenses are often passed through to the tenant (in whole or in part) in proportion to each tenant's rentable space; however, the share payable by any given tenant is calculated strictly in accordance with the lease provisions and is completely separate from the load factor. Often, there is a "base year," generally the first year of the lease, where the landlord pays all operating expenses. In subsequent years, the tenant pays only his share of any increases in operating expenses over the base year.
3. The BOMA Standard is intended to apply only to office space, and has no application to industrial, retail, or residential space.
4. Structural columns and minor vertical penetrations for such things as plumbing and telephone lines are not deducted from either usable or rentable space.

Conclusion
If you are leasing a significant amount of space, have your space physically measured by an independent professional before you sign your lease in order to verify your usable space and the load factor. Errors are common, and can add up to huge dollar amounts over the life of a lease.

For a complete copy of the BOMA Standard, contact the Building Owners Managers Association International, 1201 New York Avenue, N.W., No. 300, Washington, D.C. 20005.

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Example
A tenant quoted an annual rate of $20.00 per rentable square foot is paying $22.00 per usable square foot in a building with 1.10 load factor, and $23.00 in a building with a 1.15 load factor. This represents a $50,000.00 difference for a 10,000 square foot area over the life of a 5-year lease.

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