R/U Factor : What is it good for ? Norair Yeretsian

The efficiency factor also known as the gross up factor :
the R/U  Factor which represents the relationship between
rentable over useable areas in a commercial property .

Why use it ? What and How can we use it ?

In leasing office or retail space, we can test or compare the level
of efficiency between buildings we are considering for our tenant(s).

As we represent the interests of our tenant(s), we  want to maximize the dollars
for space that our tenant(s) clients need for their businesses.

Therefore we must know both the useable area and the rentable area and
do the calculation to determine the R/U Factor and compare the results.

The useable area is the actual, occupied space by the prospective tenant.

The rentable area is : the useable area plus a propositional allocation
of the common areas (such as the lobby,hallways,utility rooms,etc ).

Example :

Rentable area  :  1200 sf          =    R/U Factor of   1.2000  or ( 20% gross up )
Useable area  :  1000 sf

therefore if we had :
1000sf of useable area with a 1.2000 R/F factor = 1200 square feet rentable area

All rent payments ( Net rent + Additional rent ) are calculated and paid on Rentable Area.

As a comparative tool , comparing the efficiency between properties :

Building/ Property

sample     1 …………2…………….  3…………….  4

………………….1000 sf  useable area(s)

…………………………….(x)

1.2099                1.1587           1.1275                1.1639  :  R/U Factor

resulting Rentable area for each of the 4  buildings above  :

1,209.9 sf          1,158.7 sf     1,127.5 sf            1,163.9 sf

Well appears that building number 3 , all things being equal
is the most efficient and the prospect tenant can get the same
space for the least rent. This is one more variable to consider when
leasing space, its a tool as part of your analysis.

However in reality everyone knows that all things are not equal !

nyeretsian@yahoo.com May 7, 2010