Usable Area
The portion of a property available for the exclusive use and control of a tenant, generally encompassing areas where the tenant can place personnel, furniture, and equipment. Per the Building Owners and Managers Association International (BOMA) standard, usable area is measured from the tenant-side of common corridor walls, the inside surface of exterior building walls, and the middle of partition walls that separate the tenant’s space from others.
This measurement excludes areas such as restrooms, elevator shafts, stairwells, mechanical and electrical rooms, and public corridors. Unlike rentable area, usable area does not include shared or common facilities, which are accessible to and used by all occupants of the property.
Putting ‘Usable Area’ in Context
Central City Realty, a well-regarded real estate investment manager, recently acquired The Magnolia Tower, a distinguished office building located in the heart of Chicago’s bustling core business district. The Magnolia Tower, standing at 30 stories tall, features a modern design and offers 500,000 square feet of total floor space.
For the purposes of leasing, Central City Realty focuses on the differentiation between usable area and common area. The usable area is particularly important as it directly impacts how much space a tenant controls exclusively and is charged for. Rentable area, in contrast, includes the usable area plus a proportionate share of the building’s common areas, such as lobbies, restrooms, and mechanical rooms, which are shared among all tenants.
Consider a scenario involving the 15th floor of The Magnolia Tower, which comprises 20,000 square feet of total space. Of this, 17,000 square feet is designated as usable area, with the remaining 3,000 square feet allocated to common areas such as hallways, restrooms, and elevator access points that all tenants share. Thus, while the rentable area for each tenant includes their share of these common spaces, the usable area consists solely of the space within their control.
In this example, a legal firm, Baxter & Associates, leases half the floor. They are exclusively allocated 8,500 square feet of usable area. This space includes several private offices, a conference room, and a reception area, all confined within the leased square footage. The rentable area, however, would be slightly larger, including a proportion of the common areas. The remainder of the 15th floor is similarly divided among other tenants, each paying for their specific usable area while sharing the cost and access of common areas through a calculated additional rent factor based on their rentable area.
This scenario highlights how understanding and calculating usable and rentable areas is crucial for both landlords and tenants in negotiating lease terms and managing office space efficiently. The precision in defining what constitutes usable and rentable areas ensures that Baxter & Associates pays only for the space they exclusively occupy and use, as well as their fair share of shared spaces, avoiding any discrepancies in lease charges.
Frequently Asked Questions about Usable Area in Commercial Real Estate
What is usable area in commercial real estate?
Usable area is the portion of a property available for the exclusive use and control of a tenant, where personnel, furniture, and equipment can be placed. It excludes common areas such as restrooms, elevators, and public corridors.
How is usable area measured?
Per BOMA standards, usable area is measured from the tenant side of common corridor walls, the inside surface of exterior walls, and the middle of partition walls separating tenants.
How does usable area differ from rentable area?
Rentable area includes usable area plus a share of common areas like lobbies, bathrooms, and mechanical rooms. Usable area includes only the space under the tenant’s exclusive control.
What is the usable area in the Magnolia Tower case study?
On the 15th floor, which totals 20,000 sq ft, 17,000 sq ft is designated as usable area, while 3,000 sq ft is common area. Baxter & Associates leases 8,500 sq ft of usable area.
Why is understanding usable area important for tenants?
It ensures tenants are only charged for space they directly control and occupy, avoiding confusion or overpayment related to shared common areas.
What role does usable area play in lease negotiations?
Usable area is the basis for determining how much private space a tenant is leasing, impacting pricing, space planning, and how shared costs are allocated via load factors.
What related terms should be understood alongside usable area?
See related glossary entries for Rentable Area and Load Factor to understand how common area allocations affect lease terms and space planning.
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