CRE Dictionary

Floor area ratio

Floor area ratio (or FAR) is the same as floor space ratio (FSR), floor space index (FSI), site ratio or plot ratio.

Used in zoning regulations, it restricts how much property (or bulk) can be built on a site. I.e. FAR defines the site’s development density.

It works in conjunction with height, coverage, building lines and parking bay ratios. In defining parameters, floor area ratio doesn’t seek to define the building’s external shape.

The FAR is used to calculate the achievable developable bulk. By applying a value per developable square meter (or square foot), it influences how much a developer can pay for a development site.

Calculation of floor area ratio

Floor area ratio = building area¹ divided by land size (aka erf extent², lot / parcel area, plot size).

Building area approximates the gross lettable area (GLA) or rentable building area (RBA) of a property.

These two terms are defined in greater detail below.

To figure out the total building area possible, multiply FAR by the land size.

Simple example of floor area ratio

One undeveloped site with information as follows

Erf extent or lot/parcel/plot size: 5,000 sqm
FAR of 3.0
Purchase value of site: R37.5M

The total developable bulk is 15,000 sqm (5,000 sqm x 3.0).

The bulk value per sqm is R2.5K / sqm

More complex example of floor area ratio

One developed site with information as follows

Erf extent or lot/parcel/plot size: 10,000 sqm
FAR of 2.5
Existing building area of 5,000 sqm
Purchase value of site: R125M

The total developable bulk is 25,000 sqm (10,000 sqm x 2.5).

Value extraction options

Demolish the existing top structures, and redevelop the entire site. If there are existing tenants on long leases, this will made easy with redevelopment clauses in leases. Result: new 25K sqm building.
Retain the existing structures, and develop the undeveloped portion of the site (assuming such development is compliant with building set backs). Result: two structures comprising one old of 5K sqm, and one new of 20K sqm.

If the property were to be valued at R125M, and the capitalised value of the income generating existing 5K sqm of building was R100M, the value of the developable bulk is R25M (R125M less R100M). Assuming the existing structures are retained, and the new 20K sqm development is possible, the value per bulk sqm is R1,250 (R25M / 20K sqm).

Most advanced example of floor area ratio

Another development opportunity with information as follows:

A square erf, of extent or lot/parcel/plot size: 10,000 sqm (equaling the buildable land area²)
FAR of 2.5
Coverage of 60%
Height restriction of 6 storeys
Building lines or setbacks are not onerous³
Minimum parking ratio of 1.3 bays / 100 sqm
Purchase value of site: R75M

Total developable bulk of 25K sqm, actual developable bulk is 21.6K sqm. I.e. 3.4K sqm of developable bulk is lost. This assumes that the developer can afford to build basement parking.

Thus the bulk value / sqm is R3,472 (R75M / 21.6K sqm)

Calculation: the lesser of

60% coverage x 10K land extent x 6 storeys = 21.6K sqm
10K land extent x FAR of 2.5 = 25K sqm

Calculation unpacked

Applying the floor to area ratio (FAR) of 2.5 to the site of 10,000 sqm translates into 25,000 sqm of permitted bulk.

The permissible floor plate of the property is 3,600 sqm (the land extent) x 60% (the coverage). This translates to 3,600 sqm.

Applying the height restriction of 6 stories to the floor plate means that 21,600 sqm can be built (6 stories x 3,600 sqm floorplate)

Thus even though the FAR permits 25,000 sqm, a development of only 21,600 sqm is possible. Thus 3,400 sqm of developable bulk is not usable, and should be removed from any developable bulk calculations.

At a minimum parking ratio of 1.3 bays / 100 sqm, and a GLA / rentable area of 20K sqm, 260 bays will need to be built (20K sqm / 100 sqm x 1.3 bays / 100 sqm). Assuming 27 sqm per parking bay, basement parking area totaling 7,020 sqm (260 bays x 27 sqm) will be required.

Technical definitions

Floor area ratio = building area¹ divided by erf extent² (aka lot / parcel area, plot size).

The below will vary from geography to geography, based on local zoning regulations and interpretations. We have attempted to explain the general case.

¹ Building area aka gross floor area or “bulk”, is the sum of gross horizontal areas of all floors of all buildings on the site. The gross floor areas are measured from either the exterior walls, or from the center line of walls separating two buildings. This space:

Excludes, generally: basement vehicle parking, terraces (for resi: breezeways and open porches), uncovered steps, that basement space used for plant, attic space satisfying certain criteria.
Includes: all space classified as GLA, including “Linked areas” (aka remote common areas integral to the building) such as
- Changing rooms, guard houses, ablutions, cleaners’ cupboards
- Plant rooms, lift motor rooms, maintenance rooms
- Canteen, day care facilities, fitness areas and prayer rooms

Here is some greater detail on the definition of building area aka bulk or gross floor area.

² erf extent (aka lot / parcel area, plot size) is the buildable land area for the site. This is defined as that portion of the development site where construction can both legally and reasonably occur. Buildable land area specifically excludes build lines and setbacks, public streets and rights of way, wetlands and watercourses.

Therefore, where undevelopable land exists, it would need to be excluded from the total land.

For example: