What is Add-On Factor
The add-on factor is the number of available square feet in a commercial property divided by the number of rentable square feet. The result of this estimation will be one of the two figures are identical, but it is always lower than it is supposed to be because some square footage in a building will not be rentable. This non-rentable square footage includes space that is shared with other tenants such as maintenance rooms and electricity rooms. In a building purposely designed with large amounts of space dedicated to shared areas, calculating the add-on factor helps commercial landlords and tenants negotiate a fair lease agreement. The add-on factor is usually merged with the disadvantage factor. These factors are the non-usable square footage shared by the areas that are rentable per square footage.
The square footage is reduced by the loss factor which includes architectural components like support poles and maintenance rooms that is not usable by the tenants. Sometimes, loss factor is recorded as the add-on factor, which landlord has to list and make it clear for the tenant so they know usable and non-usable per square. Possible tenants oftentimes use this term to figure out and compare leases to determine which contract offers the best price. While the add-on factor is necessary and valuable in this sense, it is just as vital to define what is being used to add the number and make sure that you are comparing things of the same values.