Load Factor

Load factor is the ratio of a tenant's rentable square footage to their usable square footage, representing the proportionate share of common areas (lobbies, hallways, restrooms) added to the tenant's actual occupied space. A building with 100,000 SF of usable space and 115,000 SF of rentable space has a 15% load factor, meaning tenants pay rent on 15% more square footage than they physically occupy. Load factors typically range from 10-20% in office buildings and 5-15% in retail and industrial properties. Understanding load factor is critical for comparing lease economics across properties - a lower rent per SF on a high-load-factor building may actually cost more than a higher rent per SF with a lower load factor. NNN investors should understand load factor because it affects tenant satisfaction and renewal probability.

Load Factor is a key concept that affects property valuation, financing decisions, and investment returns in the triple net lease market. Understanding Load Factor helps investors make informed acquisition and management decisions.

Load Factor directly influences how commercial properties are valued, financed, and traded. Changes in Load Factor can impact cap rates, NOI calculations, and overall investment performance for net lease properties.

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