Reviewed by Gary E. Wilson, President & Designated Broker · Managing Greater Seattle rentals since 1982
Office leases carry a set of provisions that industrial and retail leases mostly do not, and each of them is a place where an administrative error becomes a recurring financial one.
Office space is measured on a convention rather than by its walls. Expenses are usually recovered against a base year that is fixed for the life of the tenancy. Services are provided during defined hours with everything beyond them billable. And tenants commonly hold rights to expand, contract or take space elsewhere in the building on terms agreed years earlier.
The general mechanics of lease administration — abstraction, critical dates, escalations, estoppels — are covered under Commercial Lease Administration. This page covers what office adds.
Rentable, Usable and the Load Factor
Office tenants pay rent on rentable area, which is larger than the space they actually occupy.
Usable area is broadly what the tenant occupies within its demised premises. Rentable area adds a proportionate share of the building's common areas — lobbies, corridors, restrooms, mechanical space. The relationship between them is the load factor (or add-on factor), expressed as a percentage.
A tenant occupying 9,000 usable square feet in a building with a 15% load factor pays rent on 10,350 rentable square feet. The difference is real money over a term, and it is entirely conventional — but only if the convention is stated and applied consistently.
Two things matter administratively. The measurement standard used should be identified in the lease, because standards differ and produce different numbers for the same physical space. And the load factor should be applied consistently across the building, because a rent roll where different tenants were measured on different bases produces reconciliations and expansion calculations that cannot be squared.
Remeasurement is a live issue when a building changes hands or is renovated. A new measurement producing a larger rentable area increases rent where leases permit it — and generates disputes where they do not. Whether a lease allows remeasurement, and on what standard, is worth knowing before anyone commissions one.
This page is general information, not legal advice.
The Base Year Is an Asset
Most office leases recover operating expenses on a base-year mechanism: the tenant pays its share of expenses above the level of an agreed reference year.
That reference level, once set, governs for the life of the tenancy — which makes the base year one of the more consequential numbers in the lease and one of the least examined at signing.
A base year inflated by unusual one-off costs suppresses recovery for years, because the threshold the tenant must exceed is permanently higher than the building's normal operating level. A base year set unusually low invites dispute and pressure at renewal.
Administratively, what matters after signing is consistency of expense classification. The comparison between the current year and the base year is only meaningful if the same categories are counted the same way. Reclassifying a cost mid-tenancy — moving something into the recoverable pool that was outside it in the base year — produces an increase that is arithmetically real and contractually indefensible, and it is the most common reason office reconciliations get challenged. See CAM Reconciliation.
Where a tenancy renews, whether the base year resets is a negotiated point with substantial long-term value.
Building Hours and Services
Office leases define the hours during which the landlord provides conditioning, lighting and often security and reception, with service outside those hours available as an extra.
Administratively this needs the building hours recorded per lease — they are not always identical — along with the after-hours request process, the rate and its basis, and the billing mechanism. Recovery of after-hours service is routinely lost simply because nobody was tracking usage against requests. See HVAC and Air Quality.
Holidays are worth stating explicitly. A lease referring to "building holidays" without listing them creates an annual disagreement.
Parking
Parking in an office building is a lease right with its own economics, and it is frequently administered loosely.
The provisions to track are the number of stalls allocated, whether reserved or unreserved, whether the parking is included in rent or charged separately, whether the rate can escalate and on what basis, and what happens to the allocation if the tenant expands or contracts.
In constrained submarkets parking is a genuine leasing advantage and worth managing deliberately rather than allowing to drift into whoever parks where. Over-allocation across a rent roll — where the sum of contractual entitlements exceeds the stalls available — is a real and surprisingly common problem that only surfaces when the building fills.
Expansion, Contraction and Rights of First Offer
Office tenants commonly hold rights over space they do not yet occupy: options to expand into identified space, rights of first offer or refusal over adjacent space, contraction rights allowing them to give back a portion, and occasionally termination options.
Each has a notice window, and each constrains what the landlord can do with other space in the building. A landlord negotiating a new lease for a floor subject to another tenant's right of first offer has to deal with that right first, and discovering it late can cost a deal.
The practical requirement is a schedule of every such right across the building, with the space it covers and its notice mechanics, checked before any space is marketed. See Asset Planning.
Signage, Directory and Building Identity
Office leases commonly grant rights to signage and identification, and these are worth administering because they are finite and frequently over-promised.
Directory listings in the lobby, with the number of lines a tenant is entitled to. Trivial individually and a recurring source of friction where a tenant expects more lines than the lease provides.
Suite entry signage, generally to building standard.
Exterior or monument signage, which is genuinely scarce. Building-top and monument positions are limited, and a landlord who has granted exterior signage rights to more tenants than there are positions has a problem that surfaces at the worst moment. A schedule of who holds what right, over which position, and for how long, prevents it.
Naming rights, where granted to a major tenant, which constrain what the landlord can offer anyone else and typically survive for the term.
The administrative requirement is the same as for expansion rights: a current schedule of every right granted, checked before anything is promised to a new tenant. Signage is one of the more common places a leasing team commits to something the building has already given away.
Frequently Asked Questions
What is a load factor?
The percentage by which usable area is grossed up to rentable area, reflecting the tenant's share of building common areas. A 15% load factor turns 9,000 usable square feet into 10,350 rentable square feet for rent purposes.
Why does the measurement standard matter?
Because different standards produce different numbers for the same physical space. The lease should identify which standard was used, and the same basis should apply across the building or the rent roll cannot be reconciled.
Can a building be remeasured?
Only where the leases permit it. Remeasurement producing a larger rentable area raises rent where allowed and generates disputes where not, so the right should be established before commissioning one.
Why is the base year so important?
Because it fixes the threshold above which the tenant pays expenses, for the whole tenancy. Inflated by one-off costs, it suppresses recovery for years; set too low, it invites dispute at renewal.
What causes most office reconciliation disputes?
Inconsistent expense classification between the base year and the current year. Moving a cost into the recoverable pool that was outside it in the base year produces an increase that is arithmetically real and contractually indefensible.
Why is after-hours service revenue commonly lost?
Because usage is not tracked against requests. It is recoverable, and it is recovered only where someone is administering it.
What is over-allocated parking?
Where the sum of contractual stall entitlements across the rent roll exceeds the stalls the building has. It is surprisingly common and only surfaces once the building is full.
Get Started
Office leases carry measurement conventions, base years and tenant rights that all reward precise administration and punish loose administration quietly. Wilson Management, Inc. has been administering them here since 1982.
Request a free analysis or contact us. You can also reach our Bellevue office at (425) 453-0089, 1380 112th Ave NE #203, Bellevue, WA 98004.