CREJ

March 2021 — Office & Industrial Quarterly — Page 13 www.crej.com OFFICE — LEASING B uilding Owners and Managers Association’s floor measure- ment standards are very well known throughout the com- mercial real estate industry. They are so well recognized that it is common practice to include a refer- ence to BOMA floor standards in stan- dard lease language. BOMA published the first office floor measurement standard in 1915, has updated the standard to maintain relevancy and has developed an entire suite of floor measurement standards, all of which are American National Standards Institute certified. It is no wonder that BOMA is known as the preeminent industry standard for calculating floor measurements for commercial real estate buildings.Yet, with all this vali- dation, real estate executives often are circumspect about verifying build- ing measurements or implementing revised calculations when a building is remeasured. The square footages of buildings are ever changing.You might wonder how that can happen. It really starts with the original development of the property. The initial architectural plans of a building will state what the square footage of the structure will be, when developed. During the construc- tion process, discrepancies can occur. A wall may have been constructed slightly off from the original plans, a footing might have to be altered due to site conditions, or the front entrance could have been recessed just a little more than initially anticipated. As a practical manner, when construct- ing a property, things can happen that may very well change the architect’s original calculation of building square footage. Over the years, spaces will get remodeled, cojoined, subdivided or por- tions of common corridors absorbed into tenant suites, among other types of building altera- tions. If the property is capping the load factor for market accommodation, then the measurements can be further altered, especially when market cap tolerance changes over the years and the building may amend the load fac- tor as the market will accept in order to minimize the amount of space not captured as leasable. Real estate professionals may forget to update suite square footages when they are aware of spaces that have revised measurements or, when altering space configurations, they may attempt to estimated square footages according to what they feel is a fair calculation of a space. Any of these scenarios will skew building measurements. Over time this can add up to a considerable amount of discrepancy. Square footage is the foundational measurement in commercial real estate. Tenants occupy usable square feet. Leases may be based on a capped rentable-square-foot basis. Building sales are noted on a gross-leasable- area basis. Lenders use square feet to pro forma potential gross rents. Construction costs are estimated on actual square-foot basis. Operating costs customarily are measured by a rentable square-foot basis. It seems to make sense that if square footage is the language of real estate, then a building owner would want to know a property’s true measurement calcula- tions. Consider the actual case study where a building was purchased at the height of the economy and based on a given measurement. A subsequent downturn in the economy resulted in a large building vacancy. The owner had the building professionally mea- sured and found 5% more space in the building, in this case, amounting to over 30,000 sf. This owner was able to reposition the property, then sell it without taking a loss that otherwise would have occurred. Another true-life case study is the building that was purchased based on a given measurement. Since no plans were conveyed, the buyer had the building professionally measured to find the building had 3% less square feet than it purchased. In this case this amount equated to almost 6,000 sf. A final example is a tenant audit. The last situation you wish to find yourself in is having a tenant inform you it had its space profes- sionally measured and is demand- ing a refund on rent paid over the years. Not only do you have less recurring income, but also you potentially owe back rent and have a dissatisfied tenant. It is important that the company you engage to measure the building fully understands the BOMA floor measurements so that accurate cal- culations will be received. Ensure to utilize the services of a true metrol- ogist (measurement professional). Questions you may ask include: • How many buildings and total square footage has the professional measured? • Has the professional gone to court to testify on building measurements and what was the outcome? • How long has the metrologist been providing floor measurements? •What measurement methodology does the professional use? •What deliverable will the metrolo- gist provide so that you can verify accurate floor measurements and cal- culations? • Can the professional provide rec- ommendations from satisfied clients? • Does the measurement profession- al safely store, update and maintain the floor plans and other related files in case there is an alteration to the property? Once your building is measured and new calculations are provided, com- pare them to the current rent roll.You might find that suites or overall build- ing square footage have increased or decreased from the size you previously had referenced. Once you have this information, your team can sit down and determine a strategy for imple- mentation. In conclusion, accurate measure- ment of a building provides the owner with factual data that is used to make critical decisions in the course of leas- ing, managing, buying and selling real estate. An implementation strategy of accurate calculations should be devel- oped with the property owner and the leasing/management team. Part two of this series will outline best practices for implementation of new building measurements. s Building managers: How square are your feet? Becky Hanner Principal, Commercial Asset Services