What is GLA – Gross Leasable Area in Commercial Real Estate

Gross Leasable Area (GLA) is a critical metric in commercial real estate, determining the total rentable space and directly influencing rental income, property valuation, and investment decisions.

GLA Definition: What Is GLA (Gross Leasable Area)?

GLA, or Gross Leasable Area, refers to the total floor area that is available for rent to tenants in a commercial property, such as a shopping mall, office building, or industrial facility. This area includes all space that a tenant can occupy and use, including any basements, mezzanines, or upper floors. GLA is an important metric for property owners, managers, and investors because it helps determine the rental income potential of a property.

The GLA is typically measured in square feet or square meters and includes:

1. Tenant Spaces: All the individual areas leased or leasable to tenants.
2. Common Areas: Sometimes, a proportion of the common areas (like hallways, lobbies, restrooms) if the lease agreements specify that these are included.

GLA excludes certain areas such as:

1. Structural Components: Non-leasable areas like exterior walls, vertical penetrations (elevators, stairwells).
2. Service Areas: Areas used for building management and operations, like mechanical rooms or utility spaces.

In summary, GLA represents the usable space within a building that can generate rental income. It is a critical factor in real estate investment, property valuation, and financial planning.

Why It’s Important To Understand Gross Leasable Area

Understanding Gross Leasable Area (GLA) is crucial for several reasons:

1. Revenue Calculation: GLA directly impacts the rental income potential of a property. Property owners and investors use GLA to estimate the total rent they can collect from tenants. Higher GLA typically means more revenue.
2. Valuation: Real estate appraisers and investors consider GLA when determining the value of a property. The larger the GLA, the higher the potential value, as it reflects the income-generating capability of the property.
3. Lease Agreements: Lease rates are often based on GLA. Tenants and landlords negotiate rent based on the square footage of the leasable area. Accurate GLA measurement ensures fair and transparent leasing terms.
4. Space Utilization: Understanding GLA helps in optimizing space usage. Property managers can assess how effectively the space is being utilized and make decisions to improve occupancy rates and tenant satisfaction.
5. Financial Planning: Accurate GLA measurements are essential for financial forecasting and planning. Property owners can better estimate maintenance costs, insurance, and property taxes, which are often based on the size of the leasable area.
6. Market Comparison: GLA allows for comparison between different properties in the market. Investors and property managers can evaluate the performance and competitiveness of their property relative to others.
7. Regulatory Compliance: Certain regulations and building codes may require accurate GLA measurements. Ensuring compliance can avoid legal issues and potential fines.
8. Design and Development: For developers and architects, understanding GLA is important during the design and construction phases. It ensures that the building maximizes its rentable space while adhering to design standards and regulations.

In summary, GLA is a fundamental metric in the commercial real estate industry that influences revenue, valuation, lease agreements, and overall property management.

How To Calculate Gross Leasable Area

Calculating Gross Leasable Area (GLA) involves measuring the total floor area within a commercial property that is available for rent to tenants. Here’s a step-by-step guide on how to calculate GLA:

1. Identify the Boundaries

• Determine the perimeter of the leasable space. This includes measuring from the exterior walls or the centerline of shared walls.

2. Include All Leasable Spaces

• Measure the floor area of all spaces that are leasable to tenants. This includes individual tenant spaces, retail units, office suites, and any other rentable areas.

3. Include Common Areas (if applicable)

• Depending on the lease agreements, include a proportion of the common areas (hallways, lobbies, restrooms) if they are part of the leasable space. These are often shared spaces that benefit all tenants.

4. Exclude Non-Leasable Areas

• Exclude structural components such as exterior walls, vertical penetrations (elevators, stairwells), mechanical rooms, and utility spaces that are not rentable.

5. Measure Multiple Floors

• If the property has multiple floors, measure the leasable area on each floor separately and then sum the areas to get the total GLA.

6. Account for Mezzanines and Basements

• Include any mezzanines or basements that are leasable in the GLA calculation.

7. Use Accurate Tools

• Utilize measuring tools like laser distance meters, measuring tapes, or architectural plans to ensure precise measurements.

8. Calculate the Total GLA

• Sum up all the individual leasable spaces to get the total Gross Leasable Area. The formula can be summarized as:
• Total GLA=∑(Leasable Area of each tenant space)+Proportion of common areas (if applicable)

Example Calculation

Assume you have a commercial building with the following leasable spaces:

• Retail Unit A: 1,000 sq ft
• Retail Unit B: 1,500 sq ft
• Office Suite C: 2,000 sq ft
• Common Areas (20% of total leasable spaces): 900 sq ft

If the lease agreements include common areas, you might calculate the GLA as:

Total GLA=1,000sq ft (Unit A)

Ensure to adjust the common area calculation based on the lease terms and whether the common areas are shared proportionally among tenants.

Notes

• Lease Agreements: Always refer to the specific lease agreements for each tenant, as the inclusion of common areas can vary.
• Building Standards: Follow any industry-specific standards for measuring GLA, such as those provided by the Building Owners and Managers Association (BOMA) or other relevant organizations.

By following these steps, you can accurately calculate the Gross Leasable Area, which is essential for determining rental income, property valuation, and lease negotiations.

5 Factors That Affect Gross Leasable Area

1. Building Design: The architectural layout, including floor plans and the number of floors, influences the total leasable space.
2. Common Areas: Proportions of shared spaces like lobbies and hallways included in GLA vary by lease agreements.
3. Structural Components: Non-leasable areas like walls, mechanical rooms, and stairwells reduce the GLA.
4. Tenant Requirements: Customizations or specific tenant needs may alter the usable area within a unit.
5. Regulatory Standards: Local building codes and industry standards (e.g., BOMA) can impact how GLA is measured and reported.

These factors collectively determine the total Gross Leasable Area, affecting rental income and property valuation.

How To Use GLA In GPR Calculations

Gross Leasable Area (GLA) is crucial in calculating Gross Potential Rent (GPR). To use GLA in GPR calculations:

1. Determine Rent per Square Foot: Identify the rental rate per square foot for the property.
2. Calculate GPR: Multiply the GLA by the rent per square foot.

GPR=GLA×Rent per Square Foot

For example, if a property has a GLA of 10,000 square feet and the rent is $20 per square foot, the GPR is:

GPR=10,000sq ft×$20/sq ft=$200,000

This gives the maximum rental income if the property is fully leased.

Gross Leasable Area or Net Leasable Area?

The choice between Gross Leasable Area (GLA) and Net Leasable Area (NLA) depends on the context and specific needs of the property management or investment analysis:

Gross Leasable Area (GLA)

• Definition: Total floor area available for rent, including tenant spaces and, depending on lease terms, a proportion of common areas.
• Uses:
• Retail Properties: Often used for shopping centers and malls where common areas are significant and included in rental calculations.
• Revenue Estimation: Useful for calculating potential rental income by including all rentable space.
• Market Comparison: Provides a comprehensive view of a property’s leasable capacity.

Net Leasable Area (NLA)

• Definition: The floor area exclusively occupied by tenants, excluding common areas, structural components, and non-leasable spaces.
• Uses:
• Office Buildings: Typically used where individual tenant spaces are clearly defined, and common areas are not included in rent calculations.
• Accurate Rental Income: Provides a precise measurement for rental income calculations based solely on tenant-occupied space.
• Tenant Negotiations: Useful for lease agreements focusing on the actual space occupied by tenants.

Choosing Between GLA and NLA

• Property Type: Retail properties often use GLA, while office buildings might prefer NLA.
• Lease Agreements: The terms of the lease can determine whether common areas are included (GLA) or excluded (NLA).
• Purpose of Analysis: For comprehensive market analysis and comparison, GLA might be more relevant. For precise rental income calculations and lease negotiations, NLA is typically preferred.

In summary, use GLA for a broad view of the property’s rental potential and NLA for a precise measurement of tenant-occupied space.

Gross Leasable Area Vs. The Amount Of Net Rentable Space

Gross Leasable Area (GLA) and Net Rentable Space (NRS) are both important metrics in commercial real estate, but they serve different purposes and include different components. Here’s a comparison:

Gross Leasable Area (GLA)

• Definition: The total floor area available for rent to tenants, including tenant spaces and, depending on lease terms, a proportion of common areas (e.g., hallways, lobbies).
• Components Included:
• All tenant spaces
• Proportional common areas (if applicable)
• Use Cases:
• Shopping centers, malls, and retail properties where shared spaces are significant.
• Estimating the overall rental income potential.
• Market comparisons to determine the total leasable capacity.

Net Rentable Space (NRS)

• Definition: The floor area within a building that can be occupied by tenants, excluding all common areas, structural components, and non-leasable spaces.
• Components Included:
• Only tenant-occupied spaces
• Excludes common areas, mechanical rooms, vertical penetrations (elevators, stairwells), etc.
• Use Cases:
• Office buildings and commercial properties where precise tenant-occupied space is critical.
• Accurate calculation of rental income based on the space tenants actually use.
• Lease negotiations to define the actual rentable area for tenants.

Key Differences

Inclusion of Common Areas:

• GLA: May include a proportion of common areas depending on lease terms.
• NRS: Excludes common areas entirely, focusing only on the tenant-occupied spaces.

Purpose:

• GLA: Provides a broad view of the total rentable area, useful for overall property income potential and market comparisons.
• NRS: Offers a precise measurement of the space directly generating rental income, crucial for accurate financial planning and lease negotiations.

Measurement Focus:

• GLA: Total rentable space, including shared areas.
• NRS: Tenant-specific rentable space, excluding shared and non-tenant areas.

Example

Consider a commercial property with:

• Total building area: 50,000 sq ft
• Tenant spaces: 40,000 sq ft
• Common areas: 10,000 sq ft
• GLA: Could include part of the common areas, say 45,000 sq ft (40,000 sq ft tenant spaces + part of the common areas).
• NRS: Only the 40,000 sq ft of tenant-occupied spaces.

• Use GLA for a comprehensive understanding of the property’s rental potential, especially in properties with significant shared spaces.
• Use NRS for precise rental income calculations and lease negotiations, focusing strictly on tenant-occupied spaces.

GLA (Gross Leasable Area) and Gross Potential Rent

Gross Leasable Area (GLA) and Gross Potential Rent (GPR) are closely related concepts in commercial real estate, with GLA serving as a foundational metric for calculating GPR. Here’s how they interconnect:

Gross Leasable Area (GLA)

• Definition: GLA refers to the total floor area that can be leased to tenants, including all usable areas within a building, such as retail spaces, office suites, and certain shared areas, depending on lease agreements.
• Components Included:
• Tenant spaces (e.g., individual offices, retail units).
• Proportional common areas (if specified in leases).

Gross Potential Rent (GPR)

• Definition: GPR is the total rental income a property can generate if all leasable space is fully occupied and rented at market rates.
• Formula: GPR = GLA / times / Market Rent per Square Foot
• Components:
• GLA: The total leasable area within the property.
• Market Rent per Square Foot: The prevailing rental rate for similar spaces in the market.

Calculating Gross Potential Rent

1. Determine GLA: Measure the total leasable area of the property.
2. Identify Market Rent: Research the current market rent per square foot for similar properties in the area.
3. Apply the Formula:
   
4. GPR=GLA×Market Rent per Square Foot

Example Calculation

Assume a commercial building has:

• GLA: 50,000 sq ft
• Market Rent: $30 per sq ft per year

To calculate GPR:

GPR=50,000sq ft×$30/sq ft=$1,500,000 per year

This means that if the property is fully leased at the current market rate, it would generate $1,500,000 annually in rent.

Importance of GLA and GPR

• Revenue Estimation: GPR helps property owners and investors estimate the maximum potential income from their property.
• Financial Planning: Understanding GPR is essential for budgeting, forecasting, and financial analysis.
• Property Valuation: GPR is a key factor in determining the value of a commercial property.
• Investment Decisions: Investors use GPR to assess the profitability and return on investment of potential property acquisitions.

GLA is a critical metric for calculating GPR, which represents the maximum rental income a property can generate when fully occupied. Accurate measurement of GLA and a clear understanding of market rent rates are essential for financial planning, property valuation, and investment decision-making in commercial real estate.

BOMA Standards – How Gross Leasable Area is Measured

The Building Owners and Managers Association (BOMA) provides standardized methods for measuring commercial buildings, ensuring consistency and fairness in how Gross Leasable Area (GLA) is calculated. These standards help property owners, managers, and tenants understand and compare space usage accurately.

Read more: Easement in Gross: Definition, Example, Vs. Easement Appurtenant

Key BOMA Standards for Measuring GLA

BOMA Office Standards (BOMA 2017 for Office Buildings):

• Method A: Assigns common areas to all floors based on their share of the total building area.
• Method B: Distributes common areas only to floors that benefit from them, allowing more accurate reflection of space usage for multi-tenant floors.

BOMA Retail Standards (BOMA 2010 for Retail Buildings):

• Focuses on spaces used for retail purposes, including storefronts and internal common areas accessible to retail tenants.

BOMA Industrial Standards (BOMA 2012 for Industrial Buildings):

• Measures spaces used for industrial purposes, such as warehouses and manufacturing areas.

Steps to Measure GLA According to BOMA Standards

Determine the Boundaries:

• Measure from the exterior surface of exterior walls or the centerline of demising walls separating tenants.

Include Tenant Spaces:

• Include all areas within tenant premises, such as office suites, retail units, and other leasable spaces.

Allocate Common Areas:

• Office Buildings: Common areas like lobbies, restrooms, and corridors are proportionally allocated to tenants based on their share of the building’s total rentable area.
• Retail Buildings: Common areas accessible to retail tenants, such as internal walkways and atriums, are included in the measurement.

Exclude Non-Leasable Areas:

• Exclude structural components, vertical penetrations (elevators, stairwells), mechanical rooms, and utility spaces.

Use Accurate Tools:

• Employ laser distance meters, measuring tapes, and architectural plans to ensure precision.

Example Calculation

For an office building with a total area of 100,000 sq ft:

• Tenant Spaces: 80,000 sq ft
• Common Areas (lobbies, hallways, restrooms): 20,000 sq ft

Using Method A:

• Allocate the common areas proportionally to all tenants.
• Each tenant’s share of the common areas is added to their usable space.

Using Method B:

• Allocate the common areas only to the floors and tenants that benefit from them, providing a more precise reflection of each tenant’s usage.

Benefits of Using BOMA Standards

1. Consistency: Ensures that all properties are measured using the same criteria, allowing for fair comparisons.
2. Transparency: Provides a clear and understandable method for both property owners and tenants.
3. Fair Allocation: Accurately reflects the usable space and common areas, ensuring fair rental rates.
4. Marketability: Enhances the credibility of space measurements, making properties more marketable to potential tenants and investors.

Conclusion

BOMA standards provide a structured and reliable method for measuring GLA, ensuring that all stakeholders have a clear understanding of the space available for lease. By following these standards, property owners and managers can accurately calculate GLA, leading to fairer lease agreements and better financial planning.