Study No.03
The Loss Factor
A DLS Commercial Real Estate study on New York office leasing.
In a New York City office lease, the loss factor is the share of the rentable square footage a tenant pays for but cannot occupy, typically 20 to 35 percent in Manhattan. DLS Commercial Real Estate measures the usable space independently, so the rent a tenant signs for matches the space it actually gets.
What the loss factor is
A New York office lease quotes rent on rentable square feet. Rentable includes the space the tenant occupies, called usable, plus a share of the floor and the building the tenant never has to itself: corridors, restrooms, elevator lobbies, mechanical rooms. The loss factor is that share, expressed as a percentage of rentable.
Loss factor = (rentable − usable) ÷ rentable. A 10,000 rentable square foot space with 7,300 usable square feet carries a 27 percent loss factor. Rent, tax escalations and operating escalations are all billed on the 10,000.
What is typical in Manhattan
Manhattan loss factors typically run from about 20 to 35 percent. For more than a decade, many Class A buildings have applied a full-floor loss factor around 27 percent. A partial floor carries its share of the common corridor and restrooms, so multi-tenant floors run higher, 30 to 40 percent, and landlords commonly cap them around 37 to 38 percent.
New York runs higher than most American markets partly because of how it measures. The Real Estate Board of New York method measures from the outside face of the exterior window, where the national BOMA standard measures from the window's centerline, so the same floor produces a larger rentable number here.
Why it matters more than the rent
Two spaces quoted at the same rent can cost very different amounts for the space a company can actually use. The quoted rent per rentable foot hides the difference; the rent per usable foot shows it. Comparing options on usable cost is the only fair comparison.
What a tenant can do about it
Measure the usable area independently rather than accepting the landlord's plan, and compare every option on cost per usable foot. On a partial floor, ask for the multi-tenant factor to be capped. Fix the rentable square footage in the lease so it cannot be restated upward later, including at renewal. DLS Commercial Real Estate does all three before a tenant signs.
A worked example
The same 10,000 rentable square feet at $80 per rentable foot, an $800,000 annual rent, under six loss factors.
| Loss factor | Usable square feet | Rent per usable foot | Premium over the quoted rent |
|---|---|---|---|
| 20% | 8,000 | $100.00 | 25% |
| 25% | 7,500 | $106.67 | 33% |
| 27% | 7,300 | $109.59 | 37% |
| 30% | 7,000 | $114.29 | 43% |
| 35% | 6,500 | $123.08 | 54% |
| 40% | 6,000 | $133.33 | 67% |
Illustrative. At a 35 percent loss factor, the usable space costs 15 percent more than the same quoted rent at 25 percent.
Sources: Ranges from published New York office leasing and measurement guides (2024 to 2026); the worked example is arithmetic on an illustrative space.
Questions
What is a normal loss factor for a Manhattan office?
Typically 20 to 35 percent. Full floors in many Class A buildings sit around 27 percent; partial floors run 30 to 40 percent because they carry a share of the common corridor, and landlords commonly cap them around 37 to 38 percent.
How do you compare two spaces with different loss factors?
Divide the annual rent by the usable square feet to get the rent per usable foot, and compare that. At $80 a rentable foot, a 25 percent loss factor is $106.67 per usable foot and a 35 percent loss factor is $123.08.
Can the loss factor change at renewal?
It can, if the landlord remeasures the building and the lease does not fix the rentable square footage. A tenant can ask for the rentable figure to be fixed for the term and any renewal.
Who pays for tenant representation?
In a standard New York office lease the tenant representative’s fee is customarily paid by the landlord out of the transaction, so tenant representation typically costs the tenant nothing.
Are the figures in this study specific to my building?
No. The figures are examples. Real numbers depend on the specific building, lease and term.