Earlier this year, the Building Owners and Managers Association (BOMA) International adopted new measurement standards for office buildings.  BOMA measurement standards are used primarily in leases, but are also used in development agreements and purchase/sale agreements for real property.  Currently, BOMA measurement standards exist for various types of real estate developments (office buildings, industrial buildings, multi-unit residential buildings and retail buildings) and are used for measuring the physical size of a building (gross area measurement).  BOMA is also updating its measurement standards for retail buildings and, in addition, is developing standards for mixed‑use buildings and campus developments (multiple related buildings on a single parcel).

The 2010 office building measurement standard introduces a single load factor for measuring the square footage of an entire building.  A "load factor" compares the rentable area of an office building (the area available for rent to tenants) to the usable area of that building and is used to capture those "service areas" within a building (i.e., building lobbies, utility rooms, common restrooms) that are necessary for building operation but are not available for lease to a tenant.  A load factor is represented in tenant leases as an allocation of additional square footage to each tenant of that building, which increases the proportionate costs paid by that tenant for building services and repairs (calculated on a per-square-foot basis).

Because these service areas are located disproportionately throughout the building, the prior BOMA office measurement standard calculated different load factors per floor of a building.  These per‑floor calculations resulted in confusion for real estate brokers advising prospective tenants as to the load factor applicable to various spaces within the same building, as well as for building management attempting to apply the per-floor calculations in assessing charges to building tenants.

In creating a single load factor calculation for an entire building, the 2010 BOMA office measurement standard combines factors used by property management to simplify the load factor calculation process.  The new 2010 measurement standard eliminates any load factor differentiation for full-floor tenants versus multi‑tenant floors.  In addition, tenant storage areas are deemed separately leased based upon the square footage of the relevant storage area, and basement and enclosed structured parking levels are included within the building measurement calculations.

Office building owners and tenants should consider incorporating the BOMA 2010 office building measurement standard into their lease documentation because the building single load factor calculation is designed to provide greater clarity to both owners and tenants in the application of the measurement standard and more stable calculations of rentable areas for floors within a building.  However, integration of the 2010 measurement standard into lease documents will require care.

Office building owners need to ensure consistency in their use of the new BOMA 2010 office building measurement standards because:

• BOMA measurement standards differ based upon the use of a particular building (i.e., a retail versus an office use), the calculation of square footage of a building will differ depending upon the building's use.  Owners should be careful in making any representations or warranties as to the square footage of a building (or any portion of that building) and make sure to include in any representation or warranty the relevant measurement standard and year of the applicable standard used in calculating the square footage.

   

• Converting to the new BOMA office measurement standard will be complicated.  Owners should make sure the same measurement standard is used for the entire building so that the load factor measurement applied throughout the building is consistent.  Any difference in the measurement standard used could create a gap in the square footage allocated to building tenants versus the square footage of the entire building and result in an owner not receiving full reimbursement for the costs of operating the building.  An owner should check tenant leases to confirm the owner's right to remeasure the square footage of the building and premises and ensure that the owner can remeasure using a different measurement standard.
• Changing the use of all or a portion of a building (i.e., converting a retail space to an office use) will result in a different square footage measurement based upon the relevant BOMA measurement standard used.  This change could also produce a gap in measurement similar to the difference discussed above and result in an owner not receiving full reimbursement for operating costs.  Again, an owner will need to secure flexible remeasurement rights within tenant leases to allow for these changes.

Tenants that are leasing space also need to understand which measurement standard will be used for the measurement of the space they are leasing:

• Tenants should confirm whether the correct measurement standard is being applied relative to that tenant's proposed use of the space.  For office space, particular care should be taken to understand the calculation of the load factor to be incorporated into the square footage of the space.

   

• If the building encompasses more than one use (i.e., a mixed retail and office use), tenants should confirm how the building owner is measuring the square footage of the building for purposes of assessing operating expenses and other charges to building tenants.