Load Factor

Load factor — also called the loss factor or add-on factor — is the mechanism landlords use to charge tenants for shared space. It is the ratio of a building's total rentable area to its total usable area, expressed as a percentage added on top of a tenant's usable square footage. A 15% load factor means a tenant occupying 2,000 usable square feet pays rent on 2,300 rentable square feet, the extra 300 representing its share of common areas. Load factors typically range from about 10% to 20%, and a higher figure directly raises both base rent and CAM charges. Because two buildings can quote identical per-square-foot rates but carry very different load factors, comparing them without this number produces misleading conclusions. It is one of the most important — and most overlooked — figures a tenant should confirm before signing.

Load factor silently increases what a tenant pays. Confirming it before comparing suites is essential — a lower rent with a higher load factor can cost more than a higher rent with a lower one.

A building has 100,000 rentable and 85,000 usable square feet, giving a load factor of about 17.6%. A tenant occupying 1,000 usable square feet is charged rent on roughly 1,176 rentable square feet.