Lease Area Structuring
im picking up a office building and i feel that the previous owners wasnt getting his full value in sq ft.
meaning i took the rentable area(the inside of the outer walls and half on the inner walls for area.
and then i calculated the common area( bathrooms, janitor closets, and hallways)
i added these to to make the usable area and then divided by the common area to get common area factor (CAF)
the previous owner does not reflect the extra feet in the CAF. so maybe am i calculating wrong or adding to many feet to the area.
also the way the building is set up it like 2, 2 story buildings connected by a hallway. the hallway is opened on both ends but both have ceilings. so this hallway does get added right.
any info you can give me to properly calculate the area to be leased will be appreciated.
thanks
When the appraisal is done, meet him there with the survey, and show him your results. This way it will be added to an official value, or put your concerns to rest. Then you will want to add it to the tax value if you plan to resell it, so that the tax value and in turn appraised value rises. If you plan to hold on to it, you may want to keep it under your hat so you dont have to pay more in state taxes. Also an appraiser in your area will be able to show you what rentable and common areas will be worth, and how they are calculated. In Florida we have "bonus rooms" that can be added for value all the time, usually in SFH's though.
Good Luck,
Kyle
The Building Owners and Managages Association (BOMA) sets these rules (or at least has a detailed description of how to do the calculations). See their website or your local chapter.
However as a guy who rents commercial space all the time i almost never find tenants interested in such things unless they are huge corporations with lots of bean counters. Most people just want to know what space they are renting and how much the monthly rent is.
thank you very much for the information. i will do what both have siad.
Carl-
The BOMA definition is a good start. Typically, you can find the gross square footage from the county recorder. From there, you will need to do some of your own measuring to get the rentable square footage. Typically this means gross sq ft less stair wells, elevator shafts, etc.
Once you get the rentable square footage, you can calculate the load factor. The market will dictate how much of a load factor you can pass onto your tenants. Keep in mind that if the builidng is fully leased, the current economic situation will stand until the leases expire.