Importance of Measuring SF when Leasing or Purchasing Commercial Real Estate

The area or square footage of the property is a major determinant of the value attributed to the asset. Lease rates and sales prices are often determined by the square footage. Yet few participants in the transaction ever verify the properties actual square footage. There are often errors regarding the total square feet in the space being leased or purchased.   Prior tenants may have shifted walls many times and the Landords records may not be current. Often, the square footage quoted by the Landlord or reflected in County records, floor plans or Tax records is accepted as gospel. Property Appraiser records and Tax records were never meant to be used in this manner.

The problem is further compounded by having different measurement standards. Different people measuring will obtain different results. Often a lease will specify the square footage, but does not specify which measuring standards to use. A small difference in square footage can make a difference of thousands of dollars. Sometimes tenants are overcharged. Very often, the owner does not charge enough

Then new BOMA/ANSI made significant changes in the manner of measuring an office building compared to the earlier versions: Under this version the structure is measured and evaluated as a whole as opposed to floor by floor classification. Such classification allows for a better comparison between the office structures, many of which have elaborate common area configurations,

Under BOMA standards, uniform guidelines are established for measuring interior space. BOMA takes into consideration the following areas when calculating the total square feet:
• Useable area (space being occupied by the tenant)
• Floor Common Area on the tenants floor
• Building Common Area
• Accounting for walls and the width of walls is clarified by BOMA.

First the tenants useable area is measured. The useable area on each floor is then increased to support the tenant share of the common area on their floor. A typical amount for floor common area is a range of 8-18% depending on the configuration of the floor That figure is again increased by the tenant’s proportionate share of the building common areas. These areas include main floor lobbies, storage rooms and building service rooms, all of which where not included in the rentable areas when using the previous methods

This Site gives a good definitions of the BOMA concepts: http://www.officefinder.com/boma.html

The BOMA standards were created to apply to office buildings only. Although the basic concepts are often implemented into leases of other building types, the standard does not recognize them.

Retail and industrial buildings are most often measured from the outside face of exterior walls and the center of demising walls, with no increase or gross-up factors for common areas.
Government and residential buildings can vary from this as well. The methods of measurement are unlimited to whatever any one lease may stipulate.

Make sure that your lease specifies which measurement standard to use. For instance BOMA. Services are available to verify the actual square footage using the latest BOMA standards. There is a cost to this, but it may be well worth it if you feel that you are getting the short end of the stick.

ANSI/BOMA Standard, which has become the de-facto standard for the measurement of commercial office and retail space. (NOTE: BOMA and ANSI are currently in the process of incorporating industrial space into this Standard as well.)

The ANSI/BOMA Standard lays out a fairly rigid set of guidelines and definitions, clearly defining such things as common areas, vertical penetrations, usable and rentable areas. Probably the most confusing aspect of the Standard is “where to draw the lease lines”. There are many factors which have to be taken into consideration when deciding whether a lease boundary goes to the inside of a wall, the outside, the center-line, or to the glass. As well, common areas must be distinguished between “Floor Common” (for the benefit of tenants on that floor only), or “Building Common” (for the benefit of all tenants in the building).

This differentiation also affects where the lease lines are drawn, and the resulting areas. Calculating a lease to the wrong side of a wall can dramatically affect not only that tenant, but an entire building when dealing with Building Common Area.

Having buildings measured to ANSI/BOMA Standards makes sense in many ways:

First, it facilitates the comparison of your building with others, as it is the industry-wide standard on which rents are based.

Second, the latest ANSI/BOMA Standard (1996) represents a major change from previous versions, and results in the ability to capture many areas previously not considered as part of Rentable space, in particular large building common areas such as ground-floor lobbies, mechanical rooms, storage facilities, exercise rooms, etc. In most cases, the increase in Rentable area upon resurvey to the latest ANSI/BOMA Standard more than offsets the cost of the survey and plans. And as an added benefit, when using the AccuMeasure system, you end up with a great-looking set of As-Built drawings for each floor!

The new Edition includes very significant changes in a way the measuring office building compared to the earlier versions: structure is measured and evaluated as a whole as opposed to floor by floor classification. Such classification allows for a better comparison between the office structures, many of which have elaborate common area configurations, which have not been classified using earlier BOMA standards.

The most significant change in the 1996 method includes the inclusion of building common areas in each tenant’s rentable area. These areas include such locations as main floor lobbies, electrical and mechanical rooms, service rooms, etc. – none of these were included in the rentable areas in prior BOMA Standards.

The purpose of this blog is to share information on questions that I have answered or given to  my commercail real estate clients  in the Tampa Bay, FL area. I hope that others may find the information useful.

Steven Silverman, CCIM is the broker at Tampa Commercial Real Estate, a commercial real estate brokerage firm based in Tampa, FL. Please contact us if you are looking to purchase, sell or lease commercial property in the Tampa Bay area.

email: Steven@TampaCommercialRealEstate.com.

WebSite: www.TampaCommercialRealestate.com