Rentable Area (Net Leasable Area)

Rentable area refers to the total space a tenant can lease in a commercial property, including both usable space and a proportion of common areas like lobbies, restrooms, and hallways.
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Definition

Rentable Area is a term used in commercial real estate to define the total square footage for which a tenant pays rent. This area includes not only the actual usable space within the tenant’s unit but also a proportionate share of common areas such as lobbies, corridors, restrooms, and other shared spaces. It is a key concept for both property managers and tenants, as it determines the amount of rent the tenant owes.

The rentable area is typically calculated by adding the tenant’s usable space and a pro-rata share of the common areas. This metric is particularly important for landlords and tenants in understanding the full extent of the leasing agreement and in budgeting for costs.

Examples

  1. Office Building Leasing: In a typical office building, the rentable area may include the tenant’s office plus a share of communal spaces like the lobby, restrooms, and hallways. If an office unit has 2,000 square feet of usable space and the shared common area amounts to 25% of this, the rentable area could be 2,500 square feet.

  2. Retail Space Leasing: A retailer leasing a space in a shopping mall will often pay for both the square footage of their shop and a portion of common retail areas such as food courts and corridors. For instance, if a retail unit has 800 square feet and shares 200 square feet of common areas, the total rentable area might be 1,000 square feet.

Frequently Asked Questions (FAQs)

Q1: How is the rentable area different from the usable area?

  • A: The rentable area includes both the usable space (the area solely occupied by the tenant) and a proportionate share of common areas, whereas the usable area only includes the space directly used by the tenant.

Q2: Why should tenants care about rentable area?

  • A: Tenants should care because the rentable area determines the rent amount and the share of occupancy costs that a tenant must pay. Misunderstanding rentable area can result in unexpected expenses.

Q3: How can the rentable area impact property management?

  • A: For property management, accurately calculating the rentable area ensures proper rent charges and aids in transparent communications with tenants. It also affects revenue projections and space utilization planning.
  • Net Leasable Area (NLA): Similar to rentable area, it is the amount of space that can be leased out to tenants, excluding non-usable areas such as walls and columns.
  • Usable Area: This refers to the actual space that a tenant occupies and uses, excluding common areas.
  • Common Area Maintenance (CAM): Charges tenants pay for their share of maintaining common areas within the building.
  • Gross Leasable Area (GLA): The total area designed for tenant occupancy and use, often including areas offered for lease outside the rented unit.

Online References

  1. BOMA International - Calculating Rentable Area
  2. U.S. General Services Administration - Rentable and Usable Square Footage
  3. Commercial Lease Agreements Guide

Suggested Books for Further Studies

  1. Commercial Real Estate Leasing by D. A. Low, ISBN: 978-1402408875
  2. Real Estate Principles: A Value Approach by David C. Ling & Wayne R. Archer, ISBN: 978-0073377346
  3. The Complete Guide to Investing in Real Estate for Beginners by Michele Cagan, ISBN: 978-1641524895

Fundamentals of Rentable Area: Real Estate Basics Quiz

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