Usable VS Rentable Space: Here's What You Need to Know

When calculating rent, landlords and building owners need to be careful. It’s important that they correctly calculate the usable vs. rentable space in a building in order to effectively market and rent their space. This article demonstrates what the difference between usable and rentable space is.

When it comes to investing in commercial real estate, businesses have a lot of things to consider. Not only do investors need to determine exactly whether a building or property is a worthy investment that can bring in a profit, but they also need to decide how much rent can be charged for a particular space. Understanding how to appropriate charge for rent is vital when it comes to marketing a property and finding a reliable tenant. It is also important to keep in mind that when it comes to renting a property, there is a difference between usable and rentable space. While it may seem straightforward, the reality is that many businesses and landlords aren't quite sure how to understand the difference between these two types of square footage. This can lead to discrepancies in how rent is determined and may result in lower profit margins. In order to make the most out of any business space, companies and landlords must understand exactly how these two types of space are different.

What is rentable square feet?

Simply put, rentable square feet is the space the tenant inhabits. For example, if a tenant rents a single office room that comes with a closet, both the closet and the room will be calculated when determining the rentable square footage. If a tenant rents an entire floor, of a building, this entire floor is used to calculate the rentable square footage. Things such as electrical rooms are counted when they are enclosed in the area rented by the tenant. Closets and storage spaces are counted, as well. It's important to keep in mind, however, that stairwells and elevators must be excluded when calculating the rentable square footage.

What is usable square feet?

Typically, a commercial business space will have some shared areas. These are used by all of the building's tenants and are sometimes referred to as common areas. Restrooms in the building, for example, are considered usable square footage if they are used by various tenants in the space. Additionally, lobbies and hallways are considered to be usable square footage, too. Understand that the entire usable square footage will not be charged at the same rate as the rentable square footage. Instead, a specific percentage of the usable square footage will be calculated to determine the overall rate for rent for a space in the building.

How can companies best determine an appropriate rental rate?

Before leasing a building, prospective landlords should consult with a business and commercial law attorney. The right legal representation is quite important when it comes to drafting contracts, such as lease agreements; however, an attorney can also offer guidance when it comes to determine fair rental rates. Landlords should reach out as soon as possible to get the assistance they need to have the best renting experience possible.