What to Know About Load Factor

In this article, you'll learn:

What load factor is and how it affects your rentable office space.
The difference between usable, rentable space, and how load factor is calculated.
How to compare load factors across buildings to manage leasing costs.
Why load factors can provide value through shared amenities and common areas.

When you rent an office, you don't just rent the space that you occupy. You also gain access to shared areas in the building like lobbies, hallways and restrooms and landlords don't let you use that space for free. Instead, they tack it on to the space that you rent as a load factor. Also referred to as a core factor or a loss factor (among other names), understanding your building's load is key to getting visibility into what you are actually getting for your company's expenditure.

Three Ways to Measure Space

Imagine a floor in a rectangular office building with floor plates that measure 100 feet wide and 160 feet long. The area of the floor plate would be 16,000 square feet, which is 100 multiplied by 160. That 16,000 square foot measurement represents the gross area of the floor.

Once you have calculated the gross area of the building, the next step is to subtract any vertical penetrations -- holes in the floor. Penetrations can occur for elevator shafts, stairwells, pipe chases, and the like. Under the standards used for building measurements in the United States, those areas get excluded from a building's leasable area. For the sake of this example, imagine that there are 500 square feet of vertical penetrations in the floor. When you subtract 500 from 16,000, you get the building's 15,500 square foot rentable area. This term is important because it is part of how the load factor gets calculated.

Finally, if you add up all of the spaces on the floor that are inside suite walls (technically called demising walls), you get the usable area of the floor. For instance, if the floor has a 7,000 square foot suite and a 6,100 square foot suite, the total usable area would be the sum of those two suite areas -- 13,100 square feet.

Rentable, Usable and Load Factor

To find the load factor, you divide the usable square footage into the rentable square footage and subtract one. So, in this example, you would divide 13,100 into 15,500 to get 1.183. Then, if you subtract one from that quotient, you get 0.183, or 18.3 percent. This means that the floor has an 18.3 percent load factor.

Once you know the load factor, you know how much extra space you pay for. So if you are taking the space that measures 7,000 square feet, you could add the 18.3 percent to it (7,000 multiplied by 0.183 equals 1,281) to find out that the rentable area is 8,821 square feet.

This example is a bit simplistic since load factors are frequently calculated across an entire building and could even be calculated against multiple buildings in a single development. However, the principle is the same -- the load factor tells you how much extra space you will be paying for in addition to the space that you physically occupy.

Managing the Load Factor

In most markets, paying for a load factor is a fact of life when leasing space in a building with interior corridors or shared areas. Reviewing load factors can help you compare between different buildings, though. A 5,000 square foot space measuring 250 by 200 feet in a building with a 13 percent load will be much less expensive to lease than one in a building with an 18 percent load since you will pay for 5,650 square feet of rentable space instead of 5,900 square feet.

Furthermore, have your tenant rep broker carefully review the building's information to make sure that the measurements are correct and that the load factors are calculated properly. The math underlying them and the specifics of how to measure allocate space can be confusing, so your vigilance could lead to savings.

Finally, realize that a load factor is a good thing. Hallways and bathrooms make your space usable, and lobbies and amenity areas make your office impressive and a desirable place to work and to visit. Having in-office amenity spaces like conference facilities, cafes and fitness centers let you have the benefit of those features without having to have them in your suite and entirely on your dime. As such, your load factor could be more of a value than an expense.