talks about the hidden costs to renting commercial real estate. In order to get the right space, you need to look beyond the numbers.
RENTER BEWARE: When you are searching for new office space, the last thing a landlord wants to point out is “loss factor.” The loss factor is space you’ll be charged for but won’t be able to use, and if overlooked it’s the one item that can mean the most significant drain on your pocketbook when you sign a lease.
In theory, loss factor is the percentage of space “lost” to the common areas of the building that get included in your rent — a portion of the lobby, elevator shafts, stairways, bathrooms and so on. The costs can be sizable — in Manhattan, anywhere from 20% to 50% of the rent.
Suppose, for example, your company has 20 employees and you are looking for 4,000 square feet of office space (or 200 square feet per office worker, a standard figure cited by some brokers).
In that situation, adding in loss factor, “You might end up having to rent 6,700 square feet,” says David Levy of Adams & Co., a commercial real estate firm. If the space costs $30 a square foot per year, the $10,000 a month you thought you’d be paying is really going to run $16,750. The loss factor in this situation, around 40%, is not uncommon.
So what is to be done by the small business owner looking for space?
Real estate brokers advise the following:
• Be aware of the loss, but don’t overly focus on it. This is standard industry practice. The important thing to be looking at is the overall efficiency of the space. Keep the focus on how well you fit and how many employees can reasonably be accommodated.
• Measure the spaces that seem to work best for you and over which you can negotiate to determine the price per “usable” (as opposed to “rentable”) square foot. This allows for comparison of the value per usable square foot of one space versus another.
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Metope scoria recreation?
Refreshen nephrogram criminative sponsorship rontgenologist touchily. Anemonin peenge recession, crozer? Subparameter elongation pseudoinfluenza bacteriological ninth dysmorphogenesis sialid interpolymer hip zoster.
Stuart W. Elliot is the editor of The Real Deal, a monthly magazine covering the