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1

There is a direct link between the accuracy and consistency of interior space measurement and the value of a commercial property. A key determinant of the value of commercial buildings is _ _ _ _ _

There is a direct link between the accuracy and consistency of interior space measurement and the value of a commercial property. A key determinant of the value of commercial buildings is the amount of rentable space.

2

The three primary factors in determining the maximum rentable area in a new building are _ _ _ _ _ _ List 3 _ _ _ _ _

The three primary factors in determining the maximum rentable area in a new building are government regulations, building efficiency, and gross-up.

3

_____ sets out the maximum achievable floor space ratios or FSRs for certain zones and uses.

Zoning sets out the maximum achievable floor space ratios or FSRs for certain zones and uses.

4

The FSR is _ _ _ _ _ _

The FSR is the ratio of the maximum allowable measured gross area for a building in relation to its site area.

5

Major contributor to a project's financial feasibility?

With the maximum building size capped by local planning rules, the efficiency of the building becomes a major contributor to the project's financial feasibility. 

6

Efficiency refers to . . . 

Efficiency refers to the amount of rentable area relative to the total interior space.

7

In contemporary leasing practice, the common areas are apportioned to tenants and their occupiable space or usable area is grossed-up to a larger _ _ _ _ _

In contemporary leasing practice, the common areas are apportioned to tenants and their occupiable space or usable area is grossed-up to a larger rentable area. 

8

Rent and operating expense recovery are based on _ _ _ _ _ _

Rent and operating expense recovery are based on this larger rentable area

9

Contemporary leasing practice involves _ _ _ _ _ _ a tenant's occupied space to also include a portion of the building's common areas, so that most or all building costs can be recovered. 

Contemporary leasing practice involves "grossing-up" a tenant's occupied space to also include a portion of the building's common areas, so that most or all building costs can be recovered. 

10

TOTAL RENTABLE AREA

The total of the space occupied by the tenant and the apportioned common area is generally known as the tenant's rentable area. 

11

NOTE ONLY 

This gross-up of the tenant's area may be based on space shared by several tenants on a floor (floor gross-up) or with all tenants in the building (building gross-up) or a combin­ation of both.

NOTE ONLY 

This gross-up of the tenant's area may be based on space shared by several tenants on a floor (floor gross-up) or with all tenants in the building (building gross-up) or a combin­ation of both.

12

Discuss the process & pitfalls of allocating O&M costs

Property managers must also determine the annual operating budget for a commercial building.

 

This task includes allocating the building's operating and management (O&M) costs to the tenants based on the terms of each lease agreement.

 

With O&M a substantial proportion of the building's costs, this allocation is a critical issue negotiating leases.

 

If some leases in the building are based on a grossed-up rentable area and others based on usable area, the O&M expenses may be inequitably distributed to tenants — leading to landlord-tenant disputes.

13

Insurance Coverage & Building Measurement?

Insurance coverage may be an issue as well. Property managers are responsible for placing adequate insurance on the landlord's building.

 

If the gross area of the building has been inaccurately measured, the replacement cost will be under- or over-stated — resulting in either an excessive insurance premium or under-coverage risk.

14

Appraisers face the challenge of valuing buildings with a variety of lease agreements, with some older or legacy net leases based on usable area, some contemporary net leases are based on rentable area, and others that are gross leases where the tenant pays one fee for all costs of occupancy.

 

The appraiser will usually convert all of these varying lease deals to a common net basis to facilitate comparison. This can be completed by:

• Leases based on usable area must have the lease rate "grossed up" to convert the rent to a net rentable basis.

• Leases based on gross terms, with the expense recovery built into the rent, must be converted to a net lease based on rentable area.

• Timing of roll-over of leases is also a consideration, as long-term leases will have a delay in converting to modern net lease terms with contemporary space standards.

15

Metric or Imperial System?

In the Canadian real estate market, most participants tend to use imperial system: feet, square feet, acres, etc. However, when dealing with government entities, the metric system is often used.

 

This means that real estate participants in Canada generally need to be conversant with both metric and imperial units of measure.

16

BOMA 1980

floor common area 

17

BOMA 1996

Building Common Area

18

BOMA Standards Provide _ _ _ _

The BOMA Standards provide a consistent approach for "grossing up" the measurement of the tenant's occupied areas to include the tenant's proportionate share of common areas such as hallways, lobbies, public washrooms, mechanical rooms, etc.

19

BOMA Standards & ANSI

Each of the BPMA standards has been adopted by the American National Standards Institute (ANSI).' When ANSI adopts a standard it means that there is general industry acceptance or voluntary consensus on a consistent approach to measuring business and industrial performance or assessment systems.

20

BOMA 1980

In years past, most leases were written based on the area physically occupied by the tenant - i.e., without any gross-ups for common area whatso¬ever. The 1980 version of the BOMA Standard Method for Measuring Floor Area in Office Buildings changed that by introducing a methodology for grossing up the tenants occupiable area by a factor that would account for the various Floor Common Areas such as hallways, washrooms, and other areas that serviced the particular floor. 

21

BOMA 1996

The 1996 BOMA Office Standard added a second layer of gross-ups for Building Common Areas - including main floor lobbies, building electrical rooms, elevator rooms, and other areas that service the entire building. In 2010, an updated version of the BOMA Office Standard was released. The 2010 Standard relies on the 1996 Standard as a platform, refining several aspects of the previous version and providing an option to apply a single, uniform gross-up factor for all tenants in the building.

22

Benefits of widespread adoption of BOMA 1996

Widespread adoption of the BOMA 1996 Standard has led to positive changes for landlords and tenants. Landlords are now able to consistently compare the performance of their buildings with competitors. Tenants also have better information to evaluate space alternatives and determine which properties offered the lowest overall base rent and recovery of expenses.

23

Usable Area 

Area physically occupied by the tenant

24

Basic Rentable Area 

Usable Area of the tenant plus their proportionate share of Floor Common Area

25

Rentable Area 

Basic Rentable Area plus their proportionate share of Building Common Area. This is the fully grossed-up area of each tenant space and is the basis for rent calculation.

26

BOMA 1996 STEPS

 

 

1. Determine the Gross Measured Area

2. Determine the area of the Major Vertical Penetrations

3. Calculate Floor Rentable Area

= Gross Measured Area — Major Vertical Penetrations


Measure the Usable Area on each Floor: Office and Store Area, Building

Common Area on the Floor
Calculate Floor Common Area

= Floor Rentable Area — Floor Usable Area
Calculate the Floor R/U Ratio (floor gross-up factor)

= Floor Rentable Area / Floor Usable Area
Calculate Basic Rentable Area for each tenant space and Building Common Area

= Usable Area of each tenant space or Building Common Area x Floor R/U Ratio
Determine the Building R/U Ratio

= Total Rentable Area / (Total Rentable Area — Basic Rentable Area of Building Common Area)


Calculate the Rentable Area of each tenant space

= Usable Area of each Office and Store Area x Building R/U Ratio

27

Gross Building Area

The total gross constructed area of a building, also known as Construction Gross Area is typically measured from the outside face of the building enclosing walls and includes interior building voids (open space within the enclosed building). Gross Building Area (GBA) includes basement areas. 

28

While Gross Building Area is a term that is widely used in the real estate community, it is not used in the BOMA 1996 space calculations — BOMA 1996 uses Gross Measured Area as the starting point. 

ANSWER:  Gross Measured Area

29

Gross Measured Area
Includes?  Excludes?

The Gross Measured Area includes basement areas, but excludes parking areas and loading docks outside the building line. All space within the floor area is included in this measure, meaning columns and vertical penetrations, such as elevators and stairs, are part of the gross measured area.

30

TRUE OR FALSE?
Gross Building Area (GBA) includes basement areas?

ANSWER:  TRUE