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:
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.
Comparison with Related Terms
- Net Leasable Area (NLA): The space within the tenant’s exclusive control.
- Gross Building Area (GBA): The total constructed area, including all spaces.
- Usable Area: Often synonymous with Net Leasable Area but focusing on the space that can be actually used.
FAQs
What does Rentable Area include?
How is Rentable Area different from Usable Area?
Why is Rentable Area important in commercial leases?
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.