Glossary / Space and measurement
Also known as: Add-on factor, common area factor, R/U ratio
The ratio of a tenant's rentable area to its usable area. It spreads a building's shared space, such as lobbies and corridors, across tenants, so a load factor of 1.15 means paying rent on 15 percent more area than the tenant exclusively occupies.
Cove explains that the load factor is calculated by dividing rentable area by usable area, and that a load factor of 1.15 means tenants pay for 15 percent more square footage than their exclusive space. According to Moorhead Law Group, load factors typically range from 108 to 115 percent.
How the load factor is calculated depends on the measurement standard. WeirFoulds LLP explains that the BOMA 2010 office standard offered two methods: one calculating load factors floor by floor, and one applying a single load factor building-wide. WeirFoulds notes a higher load factor means higher rent and that tenants prefer lower load factors.
The load factor turns usable area into Rentable square feet (RSF), and rent is charged on rentable area. If your commission is calculated on rent, a higher load factor at the same rate increases both the rent and the fee base. A lower load factor can make one building cheaper for your client even if its quoted rate is higher.
Because the load factor is set by the landlord's measurement, confirm which method and standard the lease uses. A remeasurement during the deal can change the RSF, the rent, and any commission estimate you have built.
Get the load factor in writing early, since it changes the rentable area that both rent and commission are calculated on.
For example, if a hypothetical suite has 10,000 usable square feet and is billed as 11,500 rentable square feet, the load factor is 11,500 divided by 10,000, or 1.15. At a hypothetical $30 per RSF per year, the tenant pays $345,000 a year, compared with $300,000 if rent were charged on usable area.
