When businesses set out to find a new location, whether it’s an office, a shop, or a warehouse, one major aspect they consider is the floor area. This measurement might seem straightforward, but how much space you lease can greatly influence everything from your monthly fees to how your business functions regularly. It is essential to grasp how floor area is defined in your commercial lease to ensure you are getting the space you expect and paying a reasonable price.
Why Floor Area Matters
Floor area goes beyond simply having enough space; it impacts several important aspects of running a business:
- Rental Costs: In most commercial leases, rent is based on the square footage of the space. The larger the floor area, the higher the rent. Knowing precisely what area is included in this calculation is critical to avoid overpaying.
- Operational Efficiency: Having the right amount of space is key to smooth business operations. Too little space creates crowding, while too much can waste valuable resources and leave a space feeling empty.
- Compliance and Regulations: Many building codes and occupancy regulations base their guidelines on floor area calculations. For instance, the number of exits and the minimum required space per employee can depend on this measurement.
- Layout and Functionality: The space should be suitable for your business activities. A retail store needs an open area for customers, while an office requires distinct working spaces. Grasping the difference between usable floor area and total area helps you determine if the layout will support your operations well.
- Future Growth: Anticipating your business’s growth and selecting a space that allows for future expansion helps prevent needing to relocate too quickly.
- Resale Value: If you plan to sublease or sell your business, the floor area will significantly influence the value of your lease.
Defining Usable and Rentable Floor Area
There are two important terms in relation to floor area that you need to understand: usable floor area and rentable floor area.
- Usable Floor Area: This refers to the actual space you can use. It includes the area where you set up furnishings, store items, or meet with customers. However, it does not cover areas such as hallways, stairwells, or elevator zones that are shared with others. Also, structural elements like columns or inner walls are not included.
- Rentable Floor Area: This is the total space used to determine rent. Rentable area typically includes the usable area, plus a share of common spaces like lobbies, restrooms, and shared corridors. This usually results in a “load factor or ratio” where your unit is assigned a portion of the common area, which increases the rentable square footage beyond that of the usable space.
Knowing the difference between these two measurements is vital because the rentable floor area can be appreciably larger than the usable space. This difference is a frequent source of misunderstandings and disputes. Therefore, it’s essential to understand the specific methods used for calculating rental areas before you start negotiating the lease.
How Floor Area is Measured
While measurement methods can vary somewhat based on location and building type, there are several common practices:
- BOMA standards: The Building Owners and Managers Association (BOMA International) lays down standards for measuring floor areas. These standards are commonly accepted in North America and utilized by many property owners and managers, ensuring a standardized approach to calculating rentable areas.
- Interior Wall Standard: This prevalent measurement technique considers the dominant surface of an interior wall as the boundary line. This method is commonly applied in cases where load-bearing walls fall within the lease space.
- External Wall Standard: For outside walls, measurements are taken from the exterior-facing glass of the building or from the center point of a solid wall.
- Professional Verification: It’s generally advisable to have measurements verified by a licensed surveyor or a professional commercial real estate agent who is knowledgeable about local measurement practices.
Always clarify the measurement methods employed in your specific lease. If any part of the lease is unclear or confusing, don’t hesitate to reach out for professional assistance.
Negotiating Over Floor Area
In many cases, you can negotiate certain elements of a lease agreement, including the square footage. Here’s how to tackle these negotiations:
- Accurate Verification: Always request to measure the space yourself, or arrange for a trusted professional to do it. Compare those measurements to the lease documents to ensure harmony between the two figures.
- Asking Questions: Don’t hesitate to ask the landlord to explain how the usable and rental areas were computed. Make sure you understand what is included in the calculations for rentable space.
- Transparency: If you notice a significant difference between your measurements and those listed in the lease, ask about those differences. Request any official architectural plans or surveys available.
- Lease Language: Negotiate language in the lease that defines the method of calculation and verification of the rentable area. This step adds a layer of security that the value of your rental is based on precise information.
- Percentage Discounts: If the commercial space lacks defined interior walls or fixed structures, consider negotiating for a reduced flat-rate rent.
Potential Issues with Inaccurate Floor Area
Inaccurate calculations or misleading measurements of floor area can lead to several issues:
- Overpayment: The most obvious problem is paying rent on space that you don’t actually occupy. Over time, this can add up to significant sums.
- Budgeting Issues: Rent is a primary component of a business’s budget, and any miscalculations can throw it off, leading to unexpected expenses.
- Subleasing Problems: If the area reflects inaccurately in your lease documents, you may encounter difficulties when trying to sublet later.
- Building Compliance Issues: Misrepresentation of floor area leading to overestimated occupancy can lead to issues with building codes and occupancy regulations.
- Disputes: Inaccuracies can create conflicts with landlords that could require legal intervention to resolve.
Frequently Asked Questions (FAQ)
Q: What does usable area include?
A: Usable floor area includes the space you can occupy directly, excluding common areas like restrooms and hallways.
Q: What is rentable floor area?
A: Rentable floor area includes your usable space along with your share of common areas in the entire building or complex.
Q: What are BOMA standards?
A: BOMA (Building Owners and Managers Association) standards provide guidelines for measuring floor area in commercial buildings, ensuring consistency in measurements and minimizing confusion between landlords and tenants.
Q: Should I measure the space myself?
A: Yes, it is advisable to independently verify measurements or hire a licensed surveyor or commercial real estate professional.
Q: What should I do if I suspect the measurements are wrong?
A: Discuss your concerns with the landlord and ask for detailed documentation explaining their measurements. Seek professional help if necessary.
Q: Can I negotiate the rentable area during lease negotiations?
A: Absolutely! You can request clarity on square footage and negotiate any discrepancies, or ask for percentage discounts on spaces that lack well-defined walls.
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Q: What happens if I sign a lease with an inaccurate area?
A: If you sign a lease containing inaccurate area measurements, you are usually bound to uphold the terms. Legal actions might be possible but are often a last resort; it’s best to verify measurements before signing.
References
- Building Owners and Managers Association (BOMA) International
- Legal and Commercial Real Estate Contract Review Material
Ready to find the right space for your business? Don’t skip the important steps in measuring and negotiating your lease. Take the time to ensure you are informed, and make your next business move with confidence!
