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Why should commercial tenants calculate load factor?

Whether your business is looking for its first brick-and-mortar location or an upgraded spot to expand, negotiating a commercial lease is likely to be in your future. Leasing space in a multi-unit building may make sense, as these spaces often offer parking, lobbies, elevators, courtyards and other common areas for all tenants and their customers to use.

Even though you do not have exclusive use of common spaces, your landlord is likely to want you to help pay for both access and upkeep. Both to know whether your lease is reasonable and to determine how much space to rent, you must calculate the building’s load factor.

What is a building’s load factor?

According to Corporate Realty Advisors, commercial brokers advertise rental spaces using the cost of rentable square feet. You are likely to pay more, however, as your total rent spend will probably include the cost of rentable space plus the cost of usable space. This is where the load factor comes in.

The higher a building’s load factor is, the more rentable space you are likely to need. If your business needs require 10,000 square feet of usable space, for example, and a building has a 20% load factor, you must rent a 12,000-sq. ft. unit.

How do you calculate load factor?

To calculate the load factor, you first must know the total area of the building. Then, you must know the total area of rentable space. After you have these two figures, you simply divide the total area by the rentable area.

For example, if a building has a total area of 15,000 square feet and a rentable area of 10,000 square feet, the load factor is 15%.

You may not have to calculate the load area on your own, as the commercial broker may have already done the calculations for you. Ultimately, though, to make a smart business decision, you may have to do some math before signing your commercial lease.

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