# Understanding the Load Factor Calculation in Commercial Leases

The load factor is a term that refers to the method of calculating the total monthly rent costs to a commercial tenant. It combines usable square feet in addition to a percentage of the square feet of common areas that the tenant is expected to benefit from. It's sometimes called an "add-on" factor or a "common area" factor.

In some leases, you will also—however seldom—see the term "mean space". Mean space is the interval between elements in a structure. Mean space allows for the normal use of an area. It is most often used when placing seats in a theater or other gathering spaces.

## What Counts as Common Areas

Common areas can include restrooms, lobbies, elevators, stairwells, and common hallways. They're areas that a commercial tenant's customers, clients, and employees can have access to and would be expected to use.

## Usable Square Feet in the Load Factor Calculation

Load factor calculations begin with identifying the difference between usable and rentable square feet. Usable square feet define the area that you and your business are actually and solely able to occupy. Other tenants do not have access to this space. It's your store, your office, your location.

If you lease store space that's 25' x 20', you have 500 square feet of usable space. This is your area and your business can presumably make use of all of it. If you leave a corner of this space vacant, that's your choice, but you could use that space if you wanted to so it contributes to your usable square feet.

You and others associated with your business can use the common areas as well—the restrooms, the lobby, elevators, hallways, and stairwells—but they're not part of your usable square feet because they're not exclusively yours.

An exception can exist if your usable square feet are divided up into separate rooms or on separate floors. In this case, any access ways that connect them would contribute to your usable square feet. They're not common areas because other tenants and the property owner don't use them.

## Rentable Square Feet in the Load Factor Calculation

Now that you've identified your usable square feet, you can figure your rentable square feet by adding on a percentage of the common areas that you and your customers also use. The percentage is typically set by the landlord or property owner and is based to some extent on your usable square footage compared to the total square footage of the building.

You might have some room to negotiate here. There's no uniform, across-the-board percentage, although it doesn't usually run any higher than 15%. It can depend on whether you're renting space in an area with many other commercial tenants, such as a mall. If your customers and clients also have the use of a large parking lot, this can bump up the percentage.