can the rentable vs. usable / load factor be applied to retail spaces in a enclosed project?

Hi all,
For an retail development in an enclosed building with public restroom and corridors, how is the tenants' leasable SF calculated?
For example, say the entire floor is 10,000 SF. Restroom and corridors are 1500 SF (15% of the project). If a retail tenants wants to rent 3,000 SF (standard measurements as in measured from the outside of exterior walls and center of shared walls), would it be reasonable to say the leasable SF is 3000, or 3000*1.15=3450 SF?
I know this approach is usually used for office buildings. But in this case of retail spaces in enclosed buildings, the landlord will be 1,500 SF short of the inteior leasable area of the load factor is not taken into consideration.
I guess I am trying to draw a distinction between retail spaces in enclosed buildings vs. retail spaces in traditional shopping plaza (where the Tenant's just pay for their pro rata of NNN but their GLA never includes shares of the common area)
Thanks in advance.
In Leasing Property - Asked by J T. - Feb 5, 2013
Report Abuse
Answer this Question

Answer(s)

Kathy S.
Broker/Agent
Petaluma, CA

Typically the cost per square foot for the usable space includes the use of common areas without a load factor. However, the operating expenses for common areas would be additional rent, whether in a NNN lease or a modified gross lease.

Feb 7, 2013
Report Abuse
Rob B.
Chandler, AZ

J.T.
Your question was well stated. Contrary to the previous answer, It really depends on your overall leasing policy. However, within your question you have contained the answer. If it were my choice in assigning square footage, I would indeed use a leasable square footage calculation for modified gross leases, and usable square footage for NNN leases. This way you will either help to cover the common area maintenance costs; or in the pure NNN lease, recover the full proportionate share of the total costs.
Onward and Upward.....
Rob Baird
rob@capratecommercial.com

Feb 13, 2013
Report Abuse
John C.
Broker/Agent
Augusta, GA

I can only confirm that Rob B. is correct,

Feb 16, 2013
Report Abuse
Chris S.
Broker/Agent
Coeur D'alene, ID

YES. The primary factor to determine how to handle this is check the competition. If competing properties do not include a load factor, then it will be hard to charge one in your case. You might just have to increase the NNN charge or increase the base rent to accomodate.

Feb 18, 2013
Report Abuse
Ara A.
Broker/Agent
Troy, MI

It is a matter of option, however I would recommend adding a load factor to account for the common space. All the Tenants are going to be using that space, so they should have to pay for it. I guess a good way of selling it is asking them if they would just not like to use the common areas. ie restrooms, mechanical and hallways, if they say no, there crazy if they say yes, then they will understand why it is done that way.

Feb 26, 2013
Report Abuse
Robert C.
Broker/Agent
Oakland, CA

Referring to the answer given by Rob B.; the question pertains to a multi-tenant retail project, and therefore, it is not in the Lessor interests to assign usable sq ft on a NNN lease. Yes, Lessor will recover the proportionate share of total costs, which amounts to a 1:1 reimbursement, yet lose the additional revenue on the leasable sq ft. As to the other answer pertaining to competitive factors; the structure of the lease maintains the investment value of the property, whether local comps support adding a load factor or not, load factors should be established for they define the value for common area.

Mar 6, 2013
Report Abuse

Welcome to Answers

LoopNet Answers is where the commercial real estate community shares what they know to help each other out. And it's all for free.

Ask a question to get advice from brokers, investors, professionals and local experts.

Answer questions to raise your visibility as a trusted advisor and build new relationships.

Ask a Question

Post Question