Common area in commercial real estate (CRE) is also known, more technically, as common facilities (and sometimes standard facilities). Common areas is less seldom called common space.
It is normally expressed in square meters or square feet.
A high-level explanation of common area
Common area is included in GLA (aka gross lettable area / gross leasable area). GLA is also termed rentable area (RBA).
Common area = GLA, less: usable area. It is made up of facilities integral to the building such as:
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- (Horizontal) shared circulation areas (such as hallways and corridors, including enclosed walkways and passages between buildings)
- Stairs, escalators, lifts/elevators (i.e. non-horizontal circulation areas),
- Changing rooms, guardhouses, ablutions, cleaners’ cupboards
- Plant rooms, lift motor rooms, maintenance rooms
- Canteen, daycare facilities, fitness areas and prayer rooms
Financial explanation of common area – working through using an example
What common area’s definition means – your occupied area (aka usable area), paced-out area is different to the GLA value on your rental invoice (and the difference is common area).
A commercial property landlord based their rent and expenses charges to a tenant on their GLA or rentable area. And, because common area is included in this, rent and expenses are also paid on it.
(Whether this is perceived right or wrong – there are cases for both arguments – this is the global industry standard)
Dealing with an example
- You as tenant see 500 sqm rentable area / GLA on your rental invoice / lease agreement / offer to lease.
- You pace out your office, but count only 450 sqm (usable area)
- That extra 50 sqm is your calculated pro rata share of the common facilities/”common areas” (required for your 450 sqm usable area to be “live-able”)
- 450 sqm usable area + 50 sqm common facilities/”common area” space = 500 sqm
- Calculation of the 50 sqm common facilities/”common area” share: the 450 sqm is 10% of the total 4,500 usable area office space. The common facilities/”common areas” are 500 sqm. 10% x 500 sqm = 50 sqm
FYI – tenant costs
Expenses – what is included, what is excluded?
- The space categorised as GLA is used to assign both rentals and expenses to tenants. For example, let’s say there is 150 sqm of office. Office rental of R120 / sqm and rates and taxes recoveries of R25 / sqm will be applied to the 150 sqm.
- Another category of space (falling outside the definition of GLA) is: Supplementary area – rent attracting (but not expense attracting). This is generally made up of space such as storage (office), terrace, yard etc. While a space-driven rental is charged, expenses for this space are not allocated to the tenant. For example, let’s say there is a terrace of 20 sqm. Terrace rental at R60 / sqm will be charged on the 20 sqm space (but no share of the other costs will be assigned to the 20 sqm).
Other possible rental, and rental exclusions
A tenant may also be charged rental on non-GLA space. For example: signage, routers and towers. Solar plant is, for now, classified in this category.
A tenant is not charged rental on:
- Supplementary area – not rent attracting (and not expense attracting)
- For example: balcony, decks, patios
- Not supplementary area (neither space rent nor expense attracting)
- For example: lawn, external car parking, equipment yards, cooling equipment
