How can you figure out how much loss factor you’re signing up for when you are scouting commercial real estate? To answer that question, we must first define Rentable Square Footage (RSF) and Usable Square Footage (USF).
Commercial brokers and landlords will use two different numbers to describe the size of a space: Rentable Square Foot (RSF) and Usable Square Foot (USF).
- Rentable Square Footage: Rentable Square Footage is the measurement of the entire space the tenant leases from the landlord, even including useless spaces (such as areas filled by walls) and spaces shared with other tenants (like stairwells and bathrooms).
- Usable Square Footage: Usable Square Footage comprises the area of the commercial space a tenant—and only that tenant—can use for desks, conference tables, etc.
Mathematically, loss factor equals “the percentage difference between rentable area and usable area.” In other words, you can calculate loss factor by dividing the difference between the Rentable Square Footage (RSF) and the Usable Square Footage (USF) by the RSF.
Let’s go back to our example from the first paragraph and use the loss factor calculation formula do the math in three easy steps:
First, find the two essential numbers: Rentable Square Feet and Usable Square Feet.
- RSF: 7,000 square feet
- USF: 5,000 square feet
Second, subtract the Usable Square Footage from the Rentable Square Footage.
- 7,000 sf (RSF) – 5,000 sf (USF) = 2,000 sf
Third, divide the difference by the Rentable Square Footage.
- 2,000 sf ÷ 7,000 sf (RSF) = 28% loss factor
- Voila. The loss factor for your commercial space is 28%. That means, you’re paying for 100% of the office space, but you are only able to actually use 72% of it. You can also think of it as a ratio—unusable space : total space—in this case, 28 : 100 (or 7 : 25).
