WHAT'S LOSS FACTOR AND WHY DO I CARE?

So you make an appointment to see a New York City commercial space that, judging from some photos you saw online, might just be ideal for your business—great location, reasonable rent, just enough square footage. Except when you get there, there seems to be less space than was advertised. Significantly less.

You’ve just experienced loss factor.

What is Loss Factor?

Loss factor is the difference between “rentable square footage” (RSF) and “usable square footage” (USF). Rentable square footage includes a proportionate share of the common areas that tenants share such as corridors, restrooms, and elevator vestibules, whereas usable square footage is the space designated solely for your company’s use. It follows that usable square footage is always less than rentable square footage.

Why Do I Care?

Commercial landlords use “rentable square footage” as the measurement for the commercial office space they are leasing, which makes sense when you consider that the use of the common areas is included in the rent. This might be confusing for a potential tenant who is expecting 1,000 USF, but gets 1,000 RSF (which could be anywhere between 600 and 800 USF). Here are some simple guidelines that will help keep the confusion to a minimum:

· New York City office space loss factors are generally between 20% and 40% (e.g. 1,000 RSF could actually be as small as 600 USF).

· Loss factors for Manhattan office space tend to be greater in office buildings constructed after 1970. This is because the large lobbies and elevator banks account for a larger proportion of common areas.

· Loss factors are less for retail/store space as the common areas tend to be minimal; ranging between 5% and 10%.

The distinction between RSF and USF is an important one, especially if your company has lots of employees (or if you happen to be into oversized furniture). If you don’t see the USF listed in a particularly appealing ad, be sure to do a little calculating before making an appointment.

If you need somebody to do the math for you, contact Alan Rosinsky at (212) 447-5403, Principal Broker of Metro Manhattan Office Space, Inc.