How Loss Factor Impacts Commercial Space

How Loss Factor Impacts Commercial Space

Loss Factor

You make an appointment to see a New York City commercial space that, judging from some online photos, appears to be ideal for your business. It’s got a great location, reasonable rent, and just enough square footage. But 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?

The loss factor is the difference between “rentable square footage” (RSF) and “usable square footage” (USF). RSF incorporates a corresponding proportion of common areas such as the lobby, corridors, public bathrooms and elevator vestibules. USF, however, is the space allocated for your company’s use. It follows that USF is always smaller than RSF.

How is Your Company Affected?

Commercial landlords use RSF as the measurement for the commercial office space they are leasing, which makes sense considering that the use of common areas is included in the rent. This might be confusing for a potential tenant who is expecting 1,000 USF, but instead finds 1,000 RSF and only 600 to 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%.
  • 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 typically smaller for retail and store space because 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 many employees (or if you happen to be into oversized furniture). If you don’t see the USF listed in an ad listing a particularly appealing property, be sure to do a little calculating before making an appointment.

Need help doing the math? Contact Alan Rosinsky, Principal Broker at Metro Manhattan Office Space, at 212-444-2241.