Expanding upon our recent guide to commercial real estate terms and basic info, here is our second installment of common terms for owners, landlords, tenants or investors in Austin and beyond. You might hear or see these terms in a commercial real estate lease or transaction – and it pays to be informed.
You may want to improve or modify an office, warehouse, or retail space to better fit your needs. If you want to improve your space, make sure you know what’s included and what’s not. Here are some common leasing terms related to space improvements, explained:
Finish Out, Tenant Improvements (TI)
This refers to any space improvements requested by the tenant such as new paint, flooring, wallpaper or finishes.
Tenant Improvement (TI) Allowance
Also known as a Finish Out Allowance, this is the dollar amount paid by the landlord for any improvements to the space. Finish out allowance is usually paid per square foot of Net Rentable Area (NRA).
Turnkey Finish Out
In some cases, the landlord will pay for 100% of the costs to modify your space. If you’re one of these lucky folks, all you have to do is turn the key and move in!
Shell space is an unfinished space which may lack interior partition walls, floor finishes, ceiling grid and tile, electrical wiring, or duct work. This type of space is more common in a new building where the finish-out will be the first for the space. If you’re a savvy negotiator, you may be able to impact how the space gets finished out.
Square Feet (SF)
In the US, commercial space is measured (and priced) in square feet. The abbreviation on your lease, marketing materials, or on a floor plan is SF, which often refers to the number of rentable square feet. However, it’s not that simple. Read on for more about space calculations in your commercial property.
Usable Square Feet (USF)
USF refers to the space granted exclusively to you under your lease. USF does not include shared spaces like hallways, restrooms, courtyards or lobbies.
Rentable Square Feet (RSF)
RSF is the specific amount of space that you actually pay rent on.
Add-on Factor / Load Factor
Yes, you will pay a percentage for your use of the common areas – typically between 10-18% To calculate RSF, take your USF x (1 + your add-on factor percentage). For example, if your add-on factor is 15% and your USF is 1,000 SF, your RSF will be: 1,000 x (1 +.15) = 1,150 RSF.
How Much Space Do You Need?
While you can physically fit a lot of people into a small space, you need to consider the comfort and productivity of your employees. In Austin, Texas, the two main constraints on office space density are, you guessed it – parking and air conditioning.
If you live in Austin, you know parking space is extremely precious, especially the closer you get to downtown. Most office spaces allot 3 – 4 parking spaces per 1,000 SF of building area. This ratio applies directly to you. Therefore, if you have more employees (or vehicles) than this allotment, you may need to look at other spaces. As buildings approach capacity, there is less wiggle room and you could be fighting with other tenants for parking.
Apart from parking, the most important consideration for calculating your commercial real estate space in Austin, Texas is air conditioning. It’s hot most of the year, and employees need a comfortable space to work in. If you try to pack in too many people and too many computers (which generate heat), you may not be able to keep the place comfortably cool. Also, if you’re over your allotted space density, the landlord won’t likely have much sympathy for you.
Here a good rule of thumb for calculating your space density:
- 100% open floor plan (used for cubes or open desks) – 5 people per 1,000 SF
- 50/50 open vs. private office + conference rooms – 4 people per 1,000 SF
- 100% private office layout – 3 people per 1,000 SF