A new client asked me to explain a term often used in office leasing, which is Add-On Factor. Although it is a somewhat simple concept, it doesn't seem to make sense to many business people. I had a reasonably smart broker that worked with my firm, Carmen Commercial Real Estate Services, for nearly four years and when she moved on to bigger and better things, add-on factor was one of the concepts that she failed to grasp.
To sum it up, the space a tenant actually utilizes within its office suite is called the Usable Area and an Add-On Factor is a percentage of space added to the Usable Area to account for the common areas within the building, i.e. building lobbies, restrooms, janitorial closets, etc.
The sum of the Usable Area and the square footage added through the Add-On factor equals what’s known as the Tenant’s Rentable Area. For example: Tenant "A" has a Usable Area of 1,000 square feet within its office suite and the building uses an Add-On Factor of 15%. Tenant "A" will actually rent, per its lease agreement, 1,150 Rentable Feet, which is the usable area of 1,000 sf + the 150 sf added by the Add-On Factor 15% of 1,000).
Add-On Factors are important to understand in respect that you, as a tenant, pay rent on the square feet added to your lease by Add-On Factors. Although the above example illustrates a relatively small amount of square footage added to Tenant "A" lease, it is not uncommon for the square footage represented by an Add-On Factor to total in the thousands. Imagine if Tenant "B" utilizes 20,000 square feet within its office suite. An Add-On Factor of 15%, which is about average, would total 3,000 square feet. At a rate of $20.00 per square foot, Tenant "B" will pay rent of $60,000 on space that is not even within the Tenant’s suite.
If this is not clear, feel free to email me and I would be glad to try to further explain the concept of Add-On Factors. Also, you can find definitions of many commercial real estate terms on the Carmen Commercial Real Estate website.
Posts
Thanks for share good blog for office leasing, For most businesses, leasing or renting office space is a major commitment. While the cost of office leasing can significantly affect your bottom line, it also has many other important consequences. Having a local Los Angeles/ Torrance office space expert on your team, who is in tune with the market and understands your needs, will make a big difference in your office space search and negotiation outcome.
ReplyDeletewe are also Provide office space in Los Angeles
However, there are devices on the market that can prevent most distracted drivers face more ramifications of the use of unsuitable fuel. These devices prevent improper fuel use are designed to make it physically impossible to ever put the wrong fuel into the car.
ReplyDeleterental agreements