Explained: Gross Lettable Area vs Net Lettable Area
WHAT IS LETTABLE AREA?
The most common question we get asked is what is Gross Lettable Area vs Net Lettable Area. Realserve are experts at creating Lettable Area Plans and we constantly field questions from either PCA or RICS members about how these are created in accordance with the method of measurement guidelines. The PCA Method of Measurement guidelines came into effect in 1997 and provides a framework for building measurement to foster consistency in lettable floor space measurement across the industry.
The measured floor space, or lettable area, is used for various property dealings including;
- Lease determinations
- Rent reviews
- Building valuations
- NABERS ratings
Calculating an accurate floor area is critical for all interested parties especially for landlords, tenants and real estate agents who need to be confident in the stated square metre space available. Differences can lead to thousands of dollars lost or paid for incorrect rent. The method of measurement needs to have been used in the field survey and resultant noted areas;
- GLA – Gross Lettable Area
- NLA – Net Lettable Area
Area measurements for any property requires the following four considerations;
A. The application of these guidelines are determined on a particular building type. i.e. Commercial, Industrial or Retail
B. Survey field work is then conducted using the appropriate method.
C. The calculation of the dominant portion of the internal or external finished surface of a vertical wall. The method applied for the building will determine whether you are calculating the dominant internal finished surface (NLA) or the external finished surface (GLA)
D. Total area of inclusions and noted exclusions are aligned with the correct method
GROSS LETTABLE AREA EXPLAINED (GLA)
The Gross Lettable Area (GLA) is determined by including everything within the external walls for single tenant GLA buildings. A Gross Lettable Area Survey is used for calculating tenancy areas in warehouses and industrial buildings generally following two general rules;
- In the case of external building wall measuring the dominant portion of the outside faces of walls
- Measuring to the centre line of inter-tenancy walls or common areas
There are things to consider such as in the scenario where it is a single tenant GLA building the area of any internal stairs are included on the upper level. If there is a mezzanine in place, this needs to be discussed with the landlord to determine if it is ‘Tenant Fit-out’ or part of the Base Building. If the mezzanine forms part of the Base building, then this should be included in the total area and be given as a separate area in the schedule.
NET LETTABLE AREA EXPLAINED (NLA)
A Net Lettable Area Survey is typically used for calculating tenancy areas in office buildings. The measurements are taken from the internal finished surface of permanent internal finished services of dominant portions of the permanent outer building walls
- Should be on the inside face of office walls window mullions and structural columns included
- Balconies terraces verandahs and covered areas should be excluded
There are things to consider such as stairs, common areas. i.e. Common lobbies and fire hose reel cupboards are provided as standard facilities in the building; these are excluded in net lettable areas. These exclusions follow the method of measurement for whole tenanted floors and/or multi-tenanted floors.
WHY IS IT IMPORTANT TO UNDERSTAND GROSS LETTABLE AREA?
Adopting the GLA method for industrial buildings includes everything within a single tenanted building such as stairs, amenities, plant rooms, ground floor entry lobbies etc.
Using the wrong method of measurement or having the wrong noted area for a warehouse can cause many implications.
As the tenant, your future operations may require a design footprint to suit conveyor layouts or increased racking capacity. Understanding that Gross Lettable Area includes the external wall thickness ensures your need of an increase in your required warehouse square metres to compensate for this.
WHY IS IT IMPORTANT TO UNDERSTAND NET LETTABLE AREA?
As a landlord using the wrong method of measurement or having the wrong noted area for your office can cause a few headaches. In our experience there have been some big differences in areas from stated design drawings to as constructed Net lettable areas.
Adopting the NLA method for commercial buildings excludes quite a few things following the PCA guidelines. Such areas as amenities, common lobbies and service ducts etc. The reason being is that they are generally shared facilities or areas that can be used by multiple tenants.
Being consistent in the reporting methodology used for your commercial property portfolio makes it easier to benchmark individual sites. It gives you the right foundation when calculating the Lettable Area to gather the initial data to review ratings, values and expenditure before factoring in its geo location to then give it a weighted average lease expiry (WALE). The WALE is measuring the average time period in which all leases in a property will expire.
The PCA Method of Measurement guidelines allows for benchmarking across states and territories by ensuring the same practices are being used to measure and create plans. There are variances in local legislation requirements for plan presentation when lodging lease surveys with their respective land titling offices in SA, QLD, ACT, and NSW although this is made easier with a correctly measured site.
FREQUENTLY ASKED QUESTIONS
How is lettable area calculated?
Lettable Area is calculated using the Property Council of Australia Guidelines applying the appropriate method of measurement for the type of premises being surveyed. I.e. Commercial (NLA), Retail (GLAR) & Industrial (GLA).
What is included in net lettable area?
Included in the Net Lettable Area calculations are:
- Window mullions.
- Window frames.
- Structural columns
- Engaged perimeter columns or piers
- Fire hose reels attached to walls.
- Additional facilities specially constructed for or used by individual tenants that are not covered in the following exclusions.
Excluded from the Net Lettable area of each tenancy are:
- Fire stairs.
- Recessed doorways.
- Telecommunication cupboards.
- Fire hose reel cupboards.
- Lift shafts.
- Smoke lobbies.
- Plant/motor rooms.
- Tea rooms and other service areas.
Where all are provided as standard facilities.
What is the meaning of gross floor area?
Gross Floor Area means the sum of the floor area of each floor of a building measured from the internal face of external walls, or from the internal face of walls separating the building from any other building, measured at a height of 1.4 metres above the floor.