What is a Load Factor in Commercial Real Estate?

In commercial real estate, the Load Factor (also known as the Core Factor or Add-on Factor) refers to the ratio of a building's common areas (like lobbies, hallways, and restrooms) to its total usable space. It is used to calculate the tenant's rentable square footage, which includes both their actual usable space and a proportionate share of the building’s common areas.

Here’s how it works:

Usable Square Footage (USF): The space that the tenant actually occupies for their exclusive use.
Rentable Square Footage (RSF): The usable space plus the tenant’s share of the common areas.

Formula for Load Factor:

This load factor is applied to determine the tenant's rentable square footage, which is typically higher than their usable square footage because it includes a portion of the common areas.

For example, if a building has a 10% load factor, that means 10% of the space you're renting is accounted for by common areas, and 90% is usable.

Importance:

Landlords use the load factor to ensure tenants contribute to the upkeep and operation of common areas.
Tenants need to understand the load factor because it affects their rent costs, which are based on rentable square footage, not just usable square footage.

What is a Load Factor in Commercial Real Estate?