What is a commercial space’s load factor?

What is a commercial space’s load factor?

On Behalf of | Feb 22, 2023 | Commercial Real Estate |

If you are looking to score a great deal on a commercial lease, you might be in luck. After all, according to JP Morgan Chase, there are likely to be some challenges across multiple sectors in the coming year. This means you might have a prime opportunity to get a good deal.

Still, you do not want to pay more for a commercial lease than you should. While many factors are likely to contribute to your decision-making, you should not overlook a property’s load factor.

What is load factor?

In commercial real estate, it is not uncommon for a property to have many different tenants. While tenants have private space they occupy exclusively, they also have access to public areas, such as elevators, lobbies and courtyards.

A property’s load factor compares total rentable space to a tenant’s useable space. This lets tenants understand how much rent they are paying in relation to the space they actually use.

How can you use load factor to your advantage?

Negotiating a commercial lease can be challenging, especially if you do not have all the available information. Luckily, you can easily calculate a property’s load factor by dividing rentable space by useable space. If the load factor is high, you are likely to pay more rent for space you cannot exclusively occupy.

While many commercial tenants enjoy being able to access communal spaces, you do not want to pay too much for these areas. Ultimately, if you keep an eye on load factor, you can get a fair deal.