In order to understand load factor, it is important to be familiar with terminology such as usable square feet and rentable square feet. Here are a few terms and explanations to help you understand what you are actually paying for your square footage, as outlined in the article “What is the Difference Between Usable vs. Rentable Square Feet?”:
Usable Square Feet
This measurement consists of the space that a tenant will actually occupy when operating their business. Usable square feet could include either a full floor, minus elevator shafts and stairwells, or just a partial floor, depending on what space the tenant leases, but in either case, this measurement also includes things like columns, recessed entries, storage, private bathrooms, kitchenettes, hallways, reception areas, etc. While a lot of these things—such as electrical rooms or janitorial closets—might not be space that can contain a desk or cubicle, it is still all included in the usable square footage measurement.
Rentable Square Feet
Rentable square feet is calculated by adding usable square feet to a pro-rata portion of the common areas in the building. Pro-rata means that this portion is calculated based on what percentage of the building a tenant will occupy. Common areas include meeting spaces, lobbies, stairways, corridors, restrooms—any spaces that are used by all tenants of a building.
Load factor a number used in the calculation that determines the rentable square feet of a particular space. The load factor, also called the common area factor, is based on the percentage of common areas in the building, and can be found by dividing the rentable square feet in the entire building by the usable square feet in the entire building. This number is then multiplied by the usable square feet of a particular space to come up with the rentable square feet for that space. Once you have the rentable square feet of a space, you can multiply it by the rental rate being offered in order to come up with how much rent you will pay monthly or annually.
Understanding these three terms and how they are related can help you make more informed decisions when comparing different offices spaces. Look closely at the amount of space advertised or the rental rate to make sure you know what kind of square footage calculation they are using, what kinds of non-usable areas will be in your space, and what you will be responsible for in terms of common area costs.