When you tour a commercial office or retail space, the broker might tell you the suite is 2,000 square feet. But when the lease agreement arrives, you are suddenly being billed for 2,300 square feet. How does that happen?
This discrepancy is not a typo. It is the result of one of the most misunderstood concepts in commercial real estate: the Load Factor (also known as the Core Factor or Add-on Factor).
To understand the Load Factor, you first need to understand the two different ways landlords measure commercial space:
In a multi-tenant building, there are spaces that all tenants share and benefit from: lobbies, public restrooms, shared hallways, stairwells, and elevator banks. The landlord cannot rent these shared spaces out to a specific business, but they still cost money to build and maintain.
To recoup these costs, the landlord calculates the total square footage of all shared spaces in the building and divides it proportionately among all the tenants. This percentage is the Load Factor.
Let's say you want to rent a 2,000 sq ft office (your USF). The building has a relatively standard Load Factor of 15%.
The landlord multiplies your 2,000 sq ft by 1.15 (15%). The resulting number is 2,300 sq ft. That 2,300 is your Rentable Square Footage (RSF), and that is the number your monthly rent, CAM fees, and property taxes will be based on.
The takeaway: A 15% Load Factor means you are paying 15% more in base rent than the physical space you actually occupy.
When comparing two different properties, you cannot simply look at the base rent per square foot. Building A might offer a cheaper base rent, but if it has a massive, luxurious lobby and a Load Factor of 25%, it might end up costing you significantly more every month than Building B, which has a higher base rent but a highly efficient Load Factor of only 10%.
Don't let the Load Factor ruin your budget. Use our free commercial lease calculator to instantly see how your building's Load Factor inflates your true monthly rent.
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