By Ahmad Oloumi, Real Data Management

Millions of dollars are lost by tenants of commercial properties each year as result of inaccurate office space measurements. Tenants may feel that they are at the mercy of their landlords when it comes to determining square footages. However, tenants do have the means available to verify the proper area calculations and potentially save millions of dollars throughout the term of the lease.

Square footage analysis can be done at the following times:

• When looking for new space as part of evaluation and comparison
• During negotiations of leases and renewal terms
• During the lease term to verify rents and share calculations

In today’s economy, tenants need to be savvy when dealing with rentable square footage (RSF) and Loss Factor issues. Landlords in each major market may calculate their respective property’s RSF differently from one another. The usable portion of a 50,000 square foot space in New York City will be significantly different than the usable portion of 50,000 square foot space in Los Angles, Washington or Chicago.  Decoding space measurement and understanding how RSF is calculated is as essential to a tenant as is the price per square foot and other lease terms.

Methods of Measurement

BUILDING OWNERS AND MANAGERS ASSOCIATION (BOMA)

The BOMA standard for measuring buildings was implemented in 1915 and has since been the most commonly used standard throughout major markets. The BOMA standard defines useable footage as the space within the dominant surface of the inside face of the exterior wall, minus all common space and major vertical penetrations. Since its initial installment, there have been several amendments to fine tune how properties are measured and how rentable footages are calculated. The latest revision of the BOMA standard occurred in 1996, and is considered more favorable toward landlords than its predecessor, BOMA 1980. Still, today we find many properties have not updated from BOMA 1980 to the current BOMA 1996 standard.

BOMA 1980 vs. 1996

BOMA 1980 apportioned Building common areas only to tenants located on that particular floor. For example, the main lobby of a building, though it services the entire property, was only apportioned to the tenants found on the ground floor. This resulted in certain floors having very high R/U ratios (the relationship between the rentable and usable footages of the floor) which decreased the floor efficiency. Also, any Building common space found on floors without tenants (i.e. penthouse machine rooms, basement, etc.) would not get apportioned to any tenant.  BOMA 1996 allows landlords to apportion ALL Building common space (i.e. main lobby, building machine rooms, etc) to each tenant within the property regardless of the particular floor the tenant may be on. This balances R/U ratios throughout the building and captures spaces that were previously being excluded. However, it is important to note that any changes to building common spaces, such as a lobby renovation, will affect the overall calculated rentable numbers throughout the property.

THE BOMA BUG

A complexity of BOMA 1996 has become known as the “BOMA bug”. The BOMA bug occurs when Building common spaces, such as an elevator machine room, are found on a multi-tenanted floor. According to the B OMA 1996 standard, not only does the floor common space (common corridor, bathrooms and machine rooms servicing only that floor) get apportioned to each tenant of that floor, it also gets apportioned into the Building common space found on the floor.  Therefore, if the floor common area is modified due to changes in tenancy on any particular floor, it will affect the total Building common area as well, thereby changing each tenant’s proportionate share calculations.

MODIFIED BOMA

The Modified BOMA standard can simply be defined as any change, edit or modifications to the BOMA 1996 standard. Landlords tend to use a Modified BOMA to either increase rentable footages or simplify/standardize a common loss/core factor throughout the property. The most common practices in a Modified BOMA are as follows:

• The use of a more aggressive method to measure useable footage. For example, measuring to the outside face of an exterior wall.
• Assigning spaces typically un-assignable or a vertical penetration as building common space. This increases total building common area which directly inflates the rentable footage of the property.
• Setting a standard loss/core factor to simplify leasing and marketing efforts. This is done to counter issues such as the BOMA Bug.
• Artificially inflating rentable footages or loss/core factors.

REAL ESTATE BOARD OF NEW YORK (REBNY)

New York City is the only major market that does not use a BOMA or Modified BOMA method of measurement. Instead, New York City uses the Real Estate Board of New York (REBNY) standard when measuring properties. This standard is far more aggressive than BOMA, as usable space is measured to the outer face of the building exterior wall. The thickness of the demising wall between tenants and floor common areas are also included as useable footage.  REBNY does not define how rentable footages should be calculated. Instead, a loss factor is applied on usable areas. This number is market driven and varies on both a full floor basis and a multi-tenant basis. Landlords in New York City use different approaches to determine what loss factor they decide to apply:

• Applying a set full floor loss factor throughout the property. It should be noted that full floor loss factors can yield very high multi-tenant loss factor on inefficient multi-tenanted floors. In this case, most landlords decide to cap the multi-tenant loss factor (usually between 33%-35%).
• Applying set rentable numbers throughout the property to simplify leasing and marketing efforts. This may result in each floor having a different loss factor.
• Matching the rentable area to the property’s building gross area. This method tends to result in loss factors lower than the market standard.

The Verification Process

Verifying the size of leased premises requires an in-depth physical survey of the space with high-tech lasers in order to ensure proper measurements.  Alternatively, an evaluation of existing CAD files and floor plans can be conducted in order to make certain footages are in line with market standards.  If necessary, new floor plans can be created to ensure the proper apportioning of common spaces.

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About this Article

This article is an excerpt from Real Data Management’s whitepaper on Methods of Building Management.  For a copy of the entire whitepaper please click here.

About the Author

Ahmad Oloumi is a Sales Manager at Real Data Management (RDM) in New York, NY. RDM provides services and software to the real estate industry, including space audits and evaluations, to help tenants understand their usable footages and ensure rentable footage and corresponding loss factors are correctly calculated. RDM also has extensive knowledge of how different major markets measure properties and what a tenant should expect when looking to take space in these cities.  To learn more about RDM please visit them online at http://www.rdm1.com

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