The Difference Between USF and RSF in Commercial Real Estate
Square footage seems simple enough on the surface. Multiply the length by the width of each room, add all rooms together, and presto. Couldn’t be more black-and-white, right?
Wrong.
In the world of commercial real estate, the actual square footage a tenant occupies and the number outlined in the lease agreement can be very different, thanks to a concept called Rentable Square Footage or RSF. It’s a big source of confusion for many. Luckily, all it takes is a little careful explanation to start making sense of the calculations at play. That’s where this blog post comes in.
USF and RSF: The Difference Between Usable and Rentable Square Footage
Usable Square Footage (USF) and Rentable Square Footage (RSF) are two different ways you might see square footage defined and it is important to understand the differences.
Usable Square Footage (USF) is essentially the space within your four walls.
Rentable Square Footage (RSF) is your usable square footage plus your share of the building’s common space.
This additional square footage is calculated and sometimes called a Load Factor or Common Area Factor and is defined below. RSF is also the number used in most all leases and therefore impacts your rent both through the calculation of net or base rent as well as share of common area expenses (CAM). In short, this is the number you want to know and you’ll want to understand how it was arrived at.
Something to note about Retail & Industrial leases; usually, the USF is your RSF. This is because, in these buildings, your space is typically self-contained. You have restrooms, you have a direct front entrance and no shared hallways or restrooms. There are exceptions, of course.
What is Common Area Factor?
Common Area Factor is comprised of the common areas not exclusive to a tenant’s use. These are also typically comprised of both common areas on a Tenant’s floor, plus common areas in the Building or Building Lobby. Some typical common areas are listed below.
Floor Common Areas
Bathrooms
Hallways
Janitorial or Mechanical Closets
Building Common Areas
Building Lobby
Fitness Center
Conference Center
Other Building Amenities
What is not included are vertical penetrations such as stairwells or elevator shafts. So, to recap, the shared square footage of a multi-tenant floor plus the shared portions of the building such as a lobby or amenity space are part of what make up the Common Area Factor.
Typical Common Area Factors in multi-tenant buildings will range from roughly 15-20%. In our examples below, we’ll use a 15% Common Area/Load Factor.
How Do You Calculate RSF vs USF?
To calculate USF, first measure the square footage of all space within your premises and exclusive to your use.
We’ll use some simple numbers to illustrate below.
Let’s say you occupy a space that measures 50 feet by 200 feet. We would calculate the USF as:
50 x 200 = 10,000 USF
Then, to get the RSF, you take:
(1+(Common Area Factor)) and then multiply by USF.
As we noted above we will use 15% for Common Area Factor. So the calculation would be as follows:
1 + .15 = 1.15 (Common Area Factor)
1.15 x 10,000 USF = 11,500 RSF
This is your Rentable Square Footage. The image below gives you an idea of how a floor in an office building might look with common area, vertical penetrations and usable area highlighted.
Exceptions to Standard Common Area Factor Calculations
Common Area Factor calculations usually follow the best practice standards laid out by the Building Owners and Managers Association (BOMA). However, market conditions can sometimes drive exceptions.
Sometimes, these exceptions work in the tenant’s favor. For example, if a property has so much shared-use space that its actual Common Area Factor would push prices too high for the local market, a landlord may choose to artificially reduce it to remain competitive.
Other exceptions work in the landlord’s favor. For example, because the concept of ‘shared space’ is subject to interpretation, property owners can potentially increase their Common Area Factor by adjusting how different spaces in their building are defined.
How You Calculate Your Rent Based on Your Square Footage
Commercial property rents are calculated off the RSF, not the USF. Landlords will typically quote a per square foot (psf) rent. For example, a building may quote $20 psf. Since we just noted rent is based on rentable square footage, you would take your:
psf rent x RSF to get your annual base rent
For example, say that:
Tenant Z is leasing a USF of 10,000 sq. ft. from Property A
Property A has a Common Area Factor of 15%, giving Tenant Z an RSF of 11,500 sq. ft
The psf Net Rent or Base Rent is stated as $20 psf
11,500 RSF x $20 = $230,000 annual base rent
This only defines base rent. To get to your total or Gross Rent, you would also do a similar calculation for Common Area Maintenance (CAM), which is generally comprised of Taxes and Building Operating Expenses.
When in Doubt, Work with a Commercial Real Estate Broker
It’s okay if the RSF vs. USF situation still feels a little murky after reading this. That’s why experts exist. Whether you’re a tenant who wants to ensure your rent is reasonable, or a landlord looking to figure out the right calculations for your property, an experienced commercial real broker can help.
At Modern CRE, we have decades of experience across all areas of commercial real estate. With 8 million sq. ft. of completed projects already behind us, we’ve got the expertise to solve even the most complex leasing challenges and secure a positive outcome for your business or property. Get in touch with us today and let's get started!