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What an add-on-factor is?


English

2013-10-14

Add-on-factor, or the shared area factor, is a commonly used term in lease agreements for a commercial area.

 

It is worth to know exactly what this factor is, as it is the reason why the lessee actually pays for a bigger area than his office.

 

If you rent a modern commercial area, the subject of your lease agreement is not just the surface of your office. While calculating the total leased area for which the lessee will pay the rent and maintenance (so-called GLA – gross leasable area), you have to add the proportional participation in the shared area of the building, which you will use together with other lessees, in relation to the total area of your office space. Shared area may include i.e. entrance to the building, reception, lobby, halls, rest rooms, and also the floor space used for vertical communication (elevators, staircases) or technical installations in the building. In other words, shared area equals the result of subtraction of the leased area form the total useable area of the building.

 

Add-on-factor is described as a percentage of lessee’s participation in the shared area in relation to the total area of the building. There are commercial buildings where you can find a separate building's add-on-factor and storey’s add-on-factor. The first one will include the reception or the lobby. The second – hallways and rest rooms of the storey, where the leased area is located.

 

Add-on-factor in the lease agreement means for the lessee, that the area for his exclusive usage will be enlarged by the percentage of the shared area factor. If the lessee’s office area is, for instance, 500 sq m with 9 per cent add-on-factor, the lessee will be paying rent and maintenance costs for 545 sq m. This 9 per cent is his participation in the common area of the building, which he will co-use with other lessee’s.

 

Adding the add-on-factor is currently a common practice on the commercial real estate market. It always exists in commercial buildings, but may sometimes equal 0 per cent – depending on the type of building management, and lessees' attempts to maximize the area they are paying for.

 

Low add-on-factor is the sign of an effectively managed building's area, and one of the basic criteria for comparing lease offers. That is why each developer should remember about this factor when designing a new commercial building.

 

Jakub Jastrzębski

 

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