When working with an office tenant, one of the first questions we ask is, “How much space do you need?” Surprisingly, many times a client isn’t sure, or has unrealistic expectations of their size requirements. In the past, office buildings were built to accommodate approximately 3 or 4 people per 1,000 square feet of rentable space. With rent being one of the highest expenses for a company, many organizations have looked to place more people in the same square footage. Why is this not always feasible? Well there are a few reasons:
First, the amount of useable square footage varies greatly between buildings, with most offices having what they call a “load factor”. A load factor is a percentage of useable square footage vs. rentable square footage. The difference comes from buildings adding the common areas as a percentage to the rentable square footage. Most office buildings have a load factor between 15% and 18%; however, some high rises can have load factors in the low 20% range. In my career, I’ve seen some landlords try to add a load factor upwards of 30%. Meaning, although you may be paying for every 1,000 sq. ft. of rentable square footage, your useable square footage may be substantially less.
Another factor which plays into the idea of office space layout is the executive suite. Older buildings may have larger executive offices and less open area. Looking at this type of layout, you are typically at less capacity. Larger offices, kitchens, and breakrooms can take a lot of useable real estate for an office. Ask yourself, do you really need executive space at 225 square feet (15’X15’) or can you get away with 144 square feet (12’X12’). The difference being, you’ll be able to get one additional person, in a large cubicle. Space layout is also constricted by the architecture of the building. Some office structures were built in such manner, making layout difficult to change into smaller offices.
Even if you can create the perfect layout, a landlord may not want a tenant who has high density occupancy. Why? After all, if you’re paying rent, what does a landlord care how many people you have in your office? There are many reasons a landlord would prefer to have less people per square foot in an office. It’s not always, and rarely is, about the landlord wanting to rent larger space. The landlord’s main concern, with higher density occupancy, is the infrastructure of the building.
Remember earlier, when I said most older buildings were built to accommodate 3-4 people per 1,000 sq. ft.? This also means infrastructure was built to accommodate those numbers. This includes power, HVAC (Heating Ventilation Air Conditioning), parking, plumbing/waste and ingress/egress. By increasing the number of people and computers, per square foot, it also increases the amount of heat emitted. This means more water, producing more waste, and more parking is needed. A landlord must take this increase in variables into consideration.
Utilities are typically one of the largest expenses for office owners/landlords. A building typically only has so much power. Every additional person adds to the power needs of the building. Not just in HVAC requirements, if they install additional machines, but also in the use of power with additional computers.
Extra heat taxes existing HVAC needs. This additional stress on machines causes higher expenses for maintenance, replacements, and life expectancy of equipment. In some cases, the infrastructure of the building won’t even allow for a higher power use. If you’re able to mitigate your power needs, it will still increase expenses for the landlord.
Water use also significantly increases with every additional person, as does waste. With additional waste, a landlord will have to pay for additional pickups.
Another factor to consider is wear and tear. Additional people equate to additional use to the paint, walls, flooring, fixtures, etc. This shortens the lifespan of the fixtures, and in turn, creates additional expenses for a landlord to replace and maintain.
In closing, a landlord must also take into consideration their other tenants. If your use and/or higher density takes up parking, creates larger messes in common areas, or utilizes/monopolizes common area bathrooms; the landlord may get complaints. This may cause losing other tenants. Ultimately, put yourself in the landlord’s shoes. This will help you negotiate the best and most realistic deal for you.