What Does "Load Factor" Mean?

Glossary of Commercial Leasing Terms: Load Factor

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Load factor is a method of calculating the total monthly rent costs to a commercial tenant. It combines usable square feet in addition to a percentage of the square feet of common areas. It's sometimes called an "add-on" factor or a "common area" factor. 

What Counts as Common Areas? 

Common areas can include restrooms, lobby, elevators, stairwells and common hallways.

Usable Square Feet

Load factor calculations begin with identifying the difference between usable and rentable square feet.

Usable square feet defines the area that you or your business are able to actually occupy. If you lease store space that's 25' x 20', you've got 500 square feet. This is your area and your business can presumably make use of all of it. If you choose to leave a corner vacant, that's your choice, but you could use that space so it contributes to your usable square feet. 

You can use those common areas – restrooms, the lobby, the elevators, hallways and stairwells – too, but they're not part of your usable square feet because they're not exclusively yours. An exception exists if your usable square feet is divided up into separate rooms or on separate floors. In this case, any accessways that connect them would contribute to your usable square feet. They're not common areas because other tenants and/or the property owner don't use them. 

Rentable Square Feet 

Now that you've identified your usable square feet, you can figure your rentable square feet by adding on a percentage of the common areas you or your customers also use.

The percentage is typically arrived at by the landlord or property owner and you may have room to negotiate here. It doesn't usually run higher than 15 percent, but this can depend on whether you're renting space in an area with many other commercial tenants. 

Calculating Load Factor 

Begin with the total square footage of the floor area of the entire building.

Now subtract the square footage of the common areas. You're left with usable square footage, at least if you're leasing the entire building, not space in a mall or strip mall. Divide the total space by the usable square footage to arrive at the load factor. 

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