Ensuring the Accuracy of Rentable Areas to Preserve Cashflows and Building Values
July 3rd, 2020
When it comes to owning and managing a commercial property, every portion of space matters.
Whether you are managing its use or optimizing its layout, you are likely looking to maximize its utility to the Occupier(s) and, therefore, the rents to the Landlord.
However, even simpler than space optimization is knowing the true rentable square footage with certainty!
That is why we spoke with Space Database, a company dedicated to helping building owners and managers measure their space with certainty.
In their opinion, and from over 25 years in the building measurement industry within North America, every investor or occupier should know and understand the rentable areas of their buildings. In most cases, they find a different area than what was outlined in their purchase/sale or lease agreements. And in some cases, when they have completed a site survey of a building, they find more area for their clients.
This is profound because more area can equate to more opportunities to increase cash flows and building values. In a sense, most current landlords have additional rent sitting idle and locked in their property because they have no way to certifiably know the true rentable area.
That is also why BOMA’s latest Industrial Standard (ANSI/BOMA Z65.2-2019) is such an important update.
For accuracy of information, much of the information below was taken from BOMA’s website and then commentary and insights added from the experts at Space Database. We have also provided links to the relevant pages should you wish to explore further yourself.
“With ANSI approval confirmed, BOMA officially launched the BOMA 2019 For Industrial Buildings – Standard Method of Measurement on April 6, 2020. The standard includes many improvements and clarifications. Property owners & managers will be interested to learn that the new changes could grow the Rentable Area of [their] industrial buildings.”
“BOMA 2019 for Industrial Buildings: Standard Method of Measurement (ANSI/BOMA Z65.2—2019) is the update to the 2012 Industrial Standard. BOMA first published its Industrial Standard with the Society of Industrial and Office Realtors® in 2001. The Industrial Standard was updated in 2004, 2009 and 2012. The Industrial Standard is intended exclusively for Industrial and Flex Buildings and their associated structures and may be applied to single-tenant, multi-tenant or multi-building configurations.
Facts Regarding the 2012 Industrial Standard:
In the world of industrial building assets, the most current measurement standards are: ANSI/BOMA Z65.2-2012:
- Method A (Exterior Enclosure Method); and, Method B (Drip Line Method). These measurement standards were developed by BOMA and SIOR and gives clients a choice of measurement methods to be considered depending on the buildings’ configurations and the markets they are located in.
- Method A: draws measurement lines to the outside surface of the buildings’ exterior walls. In the case of multi-tenanted buildings, the measurement lines are drawn to the mid-point of the shared demising walls.
- Method B: expands on Method A to also include the perpendicular drip line from any structural roof overhangs the building has. These overhangs cannot be, for example, canopies that are affixed to the buildings’ exterior walls. The overhangs must be part of the buildings’ structure. The area of these overhangs will form part of the tenants’ usable areas.
- Within each method, the usable, or occupant areas, will be grossed up using the buildings’ common areas such as electrical rooms and shared corridors. The buildings’ common areas are proportionately distributed to each tenant, resulting in the rentable areas.
The 2019 Industrial Standard, however, features a single method of measurement. It generates multiple Load Factors for various shared space types, such as Building Service Area, Floor Service Area, Inter-Building Area, etc. These Load Factors are successively applied to Occupant Areas on a pro-rata basis.”
Facts and Features of the 2019 Industrial Standard:
- The 2019 Industrial Standard follows the new format introduced with the 2017 Office Standard.
- The Industrial Standard is published in landscape to align the standard’s language with the accompanying illustrations. It is presented in a step-by-step format to make it easier to follow and rewritten to make it easier to understand the concepts and methodology, including helpful hints.
- Best Practices.
- To address ambiguities and inconsistencies found after the publication of the 2012 Industrial Standard, a series of best practice guidance was developed and incorporated into the 2019 Industrial Standard.
- Compatible with the International Property Measurement Standards (IPMS).
- The International Property Measurement Standards contain three distinct measurements, known as IPMS 1, IPMS 2 and IPMS 3. IPMS 1 is common among each of the IPMS standards and is used for measuring the total area of all classes of buildings on a floor-by-floor basis, including external walls. The Boundary Area of the 2019 Industrial Standard is fully compatible with IPMS for Industrial Buildings IPMS 1.
- The 2019 Industrial Standard introduces a new methodology for measuring industrial buildings.
- The newest industrial measurement standard is the Unified Single Methodology 2019: Method A (Exterior Wall Methodology) and Method B (Drip Line Methodology) have been replaced with a unified method of measurement.
- The 2019 Industrial Standard is an update of the 2012 standard and is intended exclusively for Industrial and Flex Buildings and their associated structures and may be applied to single tenant, multi-tenant or multi-building configurations.
- Other features include:
- Single Occupant and Multi-Occupant scenarios on one chart
- Inter-Building Areas fully implemented
- Capped Load Factor applied to individual occupants
- Flexibility to separately disclose areas of interest
- Major Vertical Penetrations at lowest level included in Rentable Area
Background and Evolution of BOMA
BOMA International is the American National Standards Institute (ANSI) Secretariat for its suite of area measurement standards. In 1915 BOMA published its first standard “Standard Method of Floor Measurement.” In 2001, BOMA and the Society of Industrial and Office Realtors® developed the first “Standard Methods for Measuring Floor Area in Industrial Buildings.”
The Industrial Standard was updated in 2004, 2009 and 2012. In March 2009 the standard was renamed “Industrial Buildings: Standard Methods of Measurement” and republished with minor changes as an American National Standard—ANSI/BOMA Z65.2—2009 on April 20, 2010. The 2019 Industrial Standard is an update of the 2012 standard and is intended exclusively for Industrial and Flex Buildings and their associated structures and may be applied to single-tenant, multi-tenant or multi-building configurations.
Additional Information on Measurement By Asset Class:
To supplement our coverage of the Industrial Standards above, Space Database has provided additional information regarding Office and Retail measurement.
Building Measurement Standards
The following measurement standards are used based on the type of asset, with consideration also given to the buildings’ configuration. The final measurement standard used will also have our clients take into consideration the market that the buildings are located in as well as market conditions.
Standard Methods for Measuring Floor Area in Office Buildings: BOMA 1980 (ANSI/BOMA Z65.1-1980)
This is the old BOMA standard and has been replaced by the BOMA 1996 standard. It is still important because area numbers based on this standard are in use on leases today. Common areas are allocated on a floor by floor basis only.
Standard Methods for Measuring Floor Area in Office Buildings: BOMA 1996 (ANSI/BOMA Z65.1-1996)
The main difference between the 1980 and 1996 standards is that the 1996 version includes a method to proportionally allocate building common areas as well as floor common areas to suite rentable areas. There are also so minor differences in how area lines are to be determined.
Standard Methods for Measuring Floor Area in Office Buildings: BOMA 2010 (ANSI/BOMA Z65.1-2010)
This is the successor to BOMA 1996. There are two options available, Method A and Method B. Method A essentially follows the same principles as BOMA 1996. Method B allocates the common areas in the building is a way that results in all the floors having the same gross-up factor. In both cases, total building rentable area remains the same as BOMA 1996.
BOMA 2017 for Office Buildings: Standard Methods of Measurement (ANSI/BOMA Z65.1-2017)
This is the latest version of the Office measurement standard. Similar to BOMA 2010, there are two options, Method A and Method B. There are some significant changes which in most cases cause the building rentable areas to increase. These included (i) Option to include balconies and finished rooftop terraces in rentable area (ii) Major Vertical Penetrations at lowest level are included in rentable area.
Retail Buildings: Standard Methods of Measurement, ANSI / BOMA Z65.5-2010
This standard provides clear definitions for measuring gross leasable area for Retail Buildings. The area lines are drawn to the outside face of the exterior walls and to the midpoint of demising walls. One main distinction of this standard is that it does not apply any floor or building common areas to the occupant areas. For some retail properties, our clients will have added definitions pertaining to lease area outlines which can extend beyond the tenant occupied areas (enclosed malls for example).
With clients throughout North America we also apply other building measurement standards:
PWGSC (Public Works and Government Services Canada) Standard
The government of Canada leases a great deal of office space and developed their own standard.
IFMA / ASTM Standard
ASTM E1836 – 08 Standard Practice for Building Floor Area Measurements for Facility Management
This is a standard used for facility management and should not be used for lease negotiations. It provides a definitive procedure for measuring and classifying floor area in buildings for use in facility management, specifying occupant requirements, space planning, and for strategic facility planning.
Real Estate Board of New York
This standard is used in New York City, Connecticut, and New Jersey.
Greater Washington Commercial Association of Realtors
This standard is used in Washington D.C.
We would like to thank our friends at Space Database for providing this insight to our readers.
For more information on how Space Database can help you accurately measure your commercial real estate, as well as managing and maintaining your property data, please visit www.spacedatabase.com or contact:
Director, Business Development
416-516-8920 ext. 236
This is a continuously evolving situation…
Whether you are an Investor or Occupier or Lender we understand that the impact of the COVID-19 pandemic on your business may be significant. All parties involved have keen issues they are focused on and potentially different priorities at this moment. Proper and transparent communication is what will sustain and strengthen the relationships that will get us to the other side… Just remember…
We are all in this together…
DISCLAIMER: All information herein is for informational purposes only. This is not intended as professional legal, insurance, tax, or accounting advice. We are not liable for any damages, real or perceived, as a result of you receiving or consuming this information. Please consult your attorney, accountant, insurance broker, or other counsel prior to making any decisions…
As we navigate through these uncertain times, rest assured that our team is working diligently to meet the needs of our clients and colleagues. The manner in which we do business is changing constantly, but our commitment to providing the best information and advice remains the same.
Cushman & Wakefield’s leadership team and research resources are committed to providing information on the overall economic and, specifically, the commercial real estate impact due to this pandemic. Please continue to check cushmanwakefield.com for the latest information regarding COVID-19 and the commercial real estate industry.
Once again, we’re all in this together, so please reach out with any needs you may have during this time.
Please stay healthy and safe.
Goran Brelih, SIOR
Senior Vice President, Broker
Cushman & Wakefield ULC, Brokerage.
Immediate Past President, SIOR – Central Canada Chapter