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Measurement Standards in Commercial Leases and the Right to Remeasure
Commercial real estate is almost always leased based on the square foot. When determining the amount of square feet to be included in the lease calculations, most landlords use what is known as the “rentable area” or “gross leasable area,” which, depending on whether the real estate use is office, retail or industrial, usually includes more square footage than the tenant actually occupies. The method used to determine the square feet directly affects the amount of rent to be paid, and is therefore of paramount importance when entering into a lease. Establishing and understanding the standard for measuring rentable space is a foundation needed when negotiating commercial real estate leases. This article briefly describes the methods used to measure the rentable area for office, retail and industrial leases and suggests sample lease language for both landlords and tenants.
Office Leases
Generally speaking, the rentable area of office space is calculated by taking the usable space ' the space that tenants actually occupy ' and adding in additional factors (often called load factors) that proportion out pro-rata shares of the building's common areas. This allows landlords to charge tenants for the tenants' proportionate share of the building's common areas and service areas. This rentable area formula is typically calculated by taking the total space on a given floor of a building and dividing it by the usable space to get a ratio of total rentable to usable floor space. This ratio represents the factor to be added to an individual tenant's usable space to cover that tenant's share of the common area of the floor in which the tenant leases space. Additional factors can be included to calculate the factor required to cover the common area of the building as a whole. The typical standard that most commercial leases use is the one established by the Building Owners and Managers Association (BOMA). Since 1915, BOMA has been publishing a standard method of floor measurement for commercial leases.
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