Rentable Area: See NET LEASABLE AREA

Rentable Area refers to the total floor area that a tenant can use exclusively during a lease, often linked with terms such as Net Leasable Area in commercial real estate contexts.

Definition and Context

The term Rentable Area is commonly used in the realm of commercial real estate to describe the total floor area that can be rented out to tenants. Typically, Rentable Area encompasses the Net Leasable Area (NLA) along with a proportionate share of common areas such as hallways, lobbies, restrooms, and utility rooms. It is fundamental in calculating rents and evaluating the potential revenue from leasing space.

Calculation and Considerations

Calculation Formula

The Rentable Area can be calculated as:

$$ \text{Rentable Area} = \text{Net Leasable Area} + \text{Common Area Allocation} $$

Where,

  • Net Leasable Area (NLA): This is the actual space within the tenant’s control.
  • Common Area Allocation: These are the shared spaces within the premises.

Types and Examples

Full-Floor Tenant

A tenant leasing an entire floor will have a Rentable Area equivalent to the Gross Building Area.

Multi-Tenant Floor

In a multi-tenant floor, the Rentable Area for each tenant includes their exclusive space plus a share of the floor’s common area.

Historical Context

Historically, the concept of Rentable Area emerged with the development of modern office buildings in the 20th century. As buildings became taller and more complex, the necessity to fairly allocate the costs associated with common areas to tenants became apparent. This ensures the financial sustainability of maintaining such infrastructures.

Applicability in Leases

Rentable Area is a critical factor in commercial leases. Lease agreements often specify the Rentable Area and the associated rental rate, influencing the financial commitments of tenants.

FAQs

What does Rentable Area include?

Rentable Area includes both the space under the tenant’s control and a proportionate share of the building’s common areas.

How is Rentable Area different from Usable Area?

Usable Area refers strictly to the space that a tenant can use exclusively, while Rentable Area includes the Usable Area plus a portion of common areas.

Why is Rentable Area important in commercial leases?

It determines the rental fees and impacts the cost allocation for maintaining and managing common areas within a building.

References

  • The Building Owners and Managers Association International (BOMA).
  • Real Estate Principles by Charles F. Floyd and Marcus T. Allen.
  • Commercial Real Estate Terms and Definitions by Victor L. Lyon and Brian A. Grimes.

Summary

Rentable Area is a fundamental concept in commercial real estate leases, encompassing the exclusive space leased to a tenant and their share of common areas. This area is crucial for determining rental rates and financial responsibilities within commercial properties. By understanding the nuances of Rentable Area, tenants and landlords can negotiate and manage leases more effectively.

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