What is the Commercial Real Estate Load Factor?

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A commercial real estate floor plan is essential to calculating load factor.

So you’ve finally decided on a great piece of commercial real estate to settle your office or business into. You hope your business will soon have a place where employees can gather and discuss with ease. However, there are still some factors you need to prepare for financially before jumping straight into a lease or rental contract. You are likely paying for a common area or building use fee on top of a rent charge. This includes areas that all tenants use, like a parking lot, elevators, and hallways. These are added to your monthly rent bill as something known as a “load factor.” Understanding what a load factor is is extremely important for properly budgeting for rent each month and also will help clarify exactly what you are paying for. This article will help clear up the often confusing terms and conditions of commercial real estate load factors.

It’s Developed by Square Feet of Space

Most commercial real estate properties are separated into separate floors. Picture in your head a typical floor plan. Depending on how many floors, this will likely include an elevator shaft, escalator, or stairs. Most offices rent a part of the floor in a designated, leasable office space. But let’s not forget the hallways that connect the office spaces or the stairwells that lead up to them. And don’t forget the countless storage closets or municipal bathrooms. All of these factor into the original square footage of the floor, except for the elevator shaft space, which is usually subtracted from the floor rent cost. Essentially, you will be paying for each square foot of the floor regardless of whether you “rent” it or not, just in lesser amounts that are split by all tenants of that commercial real estate floor. This extra cost is referred to as load factors. Normally, you will use a math problem to find out this exact cost, but for the sake of this article, we won’t go into it. Ask your real estate agent for load factor cost estimates. 

How Does Load Factor Affect My Decision?

The decision really comes down to your own personal views on what the value for your money is. For example, if your business wants to rent a more high-tech and state of the art commercial real estate property, the percentage of rent paid as a load factor may be higher. But, this extra cost may be worth paying extra for a much nicer building than others. Some might not want to pay such a high load factor cost and opt for a building with a lower fee. 

Trust the Professionals at Clagett Enterprises for Your Realty Needs

If you’re looking for an experienced property management company, the perfect realtor for your property, or a professional to assist you during your purchase of any home, you can rely on Clagett Enterprises. Clagett Enterprises is a full-service real estate company with almost 30 years of experience in the Frederick and Western Maryland area. For assistance with commercial sales, leasing, management, and development and consulting, contact us online or give us a call at 301-665-6009. To meet our team and see some of our beautiful homes, follow us on Facebook and Linkedin.

This entry was posted on Thursday, March 11th, 2021 at 9:30 pm. Responses are currently closed, but you can trackback from your own site.