What Is Load Factor in Commercial Leasing?
(And Why You’re Paying for Space You Don’t Actually Use)
If you've ever wondered why you're paying rent on 3,600 square feet when your team is only using 3,000, congrats, you've been introduced to one of commercial real estate’s most overlooked (and overpriced) terms: Load Factor. It sounds harmless enough. But get it wrong, and you could be shelling out thousands for space your business never actually steps foot in.
So, What Is Load Factor?
Load Factor is the ratio that determines how much shared space in a building you’re paying for on top of your actual, usable office or industrial space.
In simpler terms:
🧾 Rentable Square Footage = Usable SF + Your Share of Common Areas
🧮 Load Factor = Rentable SF ÷ Usable SF
Common areas typically include:
Lobbies
Hallways
Washrooms
Shared kitchens
Utility rooms
You don’t occupy them, but you help pay for them. Welcome to commercial leasing.
Why It Matters
Most tenants negotiate based on rentable square footage but what you actually use is your usable square footage. If you don’t understand the Load Factor, you’re comparing apples to well, conference rooms.
Here's an example:
Let’s say you lease 3,000 usable SF, and the building has a 20% Load Factor.
🧮 Your rent is now based on 3,600 rentable SF.
That’s 600 square feet of hallway, lobby, and elevator shaft you never asked for but now fund.
And yes, it’s built into your monthly rent, year after year.
Is Load Factor Negotiable?
Sometimes, yes especially in older buildings with inefficient layouts or high vacancy. Other times, no especially in Class A buildings where the amenities are the draw (and you’ll pay for them, whether you use them or not). However, here's the key: Even if you can't negotiate the Load Factor itself, you can use it to compare spaces properly. A space with a lower base rent but a higher load factor might not actually be the better deal.
How to Protect Yourself
✅ Always ask for both usable and rentable SF in proposals.
✅ Compare Load Factors across different buildings.
✅ Run the math before making assumptions.
✅ Use a commercial realtor who can read past the buzzwords. (That’s us.)
Final Thought:
Load Factor isn’t just math, it’s leverage.
If you don’t know what it is, you’re negotiating blind.
📩 Want to break down your lease or compare spaces properly? Let’s run the numbers before your budget gets loaded with things you didn’t sign up for.
Susan Williamson
Commercial Realtor – Williamson Commercial Realty
✉️ [email protected]
🌐 williamsoncommercialrealty.com
I represent you like it's my name on the lease.
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