Load factor is a price, not a technicality

Every office lease you will ever sign quotes a rate per rentable square foot. Almost nobody works in rentable square feet. You work in usable square feet, the area inside your demising walls, and the gap between the two is the load factor.

The arithmetic is simple. Rentable equals usable multiplied by the load factor. A 10,000 usable square foot requirement in a building with a 1.16 load factor is 11,600 rentable square feet. At a base rate of 19.50 with 13.85 of operating expenses, that is 386,540 dollars a year. The same requirement in a building at 1.09 is 10,900 rentable square feet, which at 24.00 modified gross is 261,600. The second building has a face rate nearly five dollars higher and costs a third less, because the structure and the factor are different.

Where the number comes from

Load factor distributes the building's common areas across its tenants: the lobby, the corridors, the restrooms, the mechanical and electrical rooms, the loading area. A tower with two elevator banks, a double loaded corridor and a generous lobby has more of it. A converted warehouse with one stair, one small lobby and no interior corridor has much less.

In the Twin Cities, tower load factors typically run 1.15 to 1.20. Converted brick and timber buildings in the North Loop run 1.09 to 1.13. Suburban single storey office often sits at 1.08 to 1.12. Medical office runs higher, frequently 1.18 to 1.22, because of the waiting and circulation areas.

Two things worth verifying

• Ask which BOMA standard the measurement uses and what year. The 2017 and the older 1996 standards treat some areas differently, and buildings are sometimes still quoted on the older basis.
• Ask whether the factor is a building factor or a floor factor. A single tenant floor in a multi tenant building may carry only the building common area, not the floor corridor, which lowers the effective factor.
• Ask for a test fit before you sign. The most expensive load factor is the one you discover when the architect tells you the usable area will not hold your programme.

What to do with it

Convert every proposal on your shortlist to gross occupancy cost per usable square foot. Take the base rate, add the operating expenses that the structure actually passes through, multiply by the rentable area, and divide by the usable area you will really occupy.

In our experience that single step changes the ranking of a shortlist roughly one time in three. It is not a negotiating tactic; it is arithmetic that the flyer has no reason to do for you.

The figures in this article are illustrative samples for a demonstration website and should not be used for a real decision.