GROSS LEASABLE VERSUS NET RENTABLE SQUARE FOOTAGE!!!

By
Commercial Real Estate Agent with KW Realty Centre-Columbia, MD

Office landlords charge rent and state the square footage of office buildings based upon the "gross leasable area" of the office building and of the tenant's premises.  Sometimes, that causes tenants difficulty, as they mistakenly think that their space actually contains those measurements.  In reality, the gross leasable area of a building includes common areas, elevators, common bathrooms, stairwells, and other portions of the building that the tenant doesn't occupy.  The actual square footage of the tenant's space is called the net rentable area of the space.  Almost without exception, the gross leasable area of a tenant's space is larger than the actual physical measurements of the space.  Thus, that 5,000 sq. ft. of office space that you are looking to lease isn't really 5,000 sq. ft.  It's more like 4,300, or 4,500, or 4,700 (it depends on the particular building and the amount of non-rentable space that is included in the figures). 

I've seen tenants do drawings of how their company is going to fit into a space.  They are often surprised, and say "I could have sworn that 5,000 sq. ft. would have done the trick.  In many cases, that's because your 5,000 sq. ft. space isn't really 5,000 sq. ft..  When you are budgeting for your new office space, be sure to take into account the difference between the gross leasable area of your space and the net rentable area.

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Ankit Behl

Hi Evan,

Hope you are doing well. I just wanted to know, Is tenant requires to pay rent on the basis of Gross Leasable Area or Net Leasable Area?, If on the basis of GLA then why they agree to it?

 

Looking forward for your reply

Thanks, Ankit

 

 

 

 

Feb 23, 2010 02:08 AM #1
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Tom Bellanca

In most cases you will pay based on Gross Leasable Area because you are responsible for a portion of the common area.

Oct 03, 2010 09:03 PM #2
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Evan Langert

Ankit:

In the vast majority of cases, the tenant will have to pay based upon the GLA of the building.  It's not so much a matter of whether you want to pay for your share of the common area.  Rather, that's how pricing models have developed over the years, and they've been that way for decades.  If you want to lease a space, the pricing is based on the GLA, and you simply aren't going to be able to lease a space from the landlord.

Landlords also have models in which they calculate their return on investment on a given property.  As investors, they require that minimum return to elect to invest in a commercial real estate asset.  If they gave the tenants rents based upon the net rentable area, then they would simply adjust the per square foot rents upward so that they could meet their target ROI's.

 

 

Oct 04, 2010 09:24 AM #3
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Evan Keith Langert

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