When it comes to commercial real estate, understanding how space is measured can make a world of difference. Whether you’re a seasoned investor, a landlord managing multiple properties, or a tenant looking for the perfect business location, knowing how to evaluate and compare properties is essential. One of the most critical metrics in this regard is the Gross Leasable Area (GLA).
So, what is GLA in commercial home real estate? Simply put, GLA is the total area available for rent to tenants in a commercial property. From shopping centres to office buildings, GLA is a foundational concept that influences everything from lease agreements to property valuation. Yet, it’s often misunderstood or overlooked by those new to the real estate market.
What is GLA in Commercial Home Real Estate?
Defining Gross Leasable Area (GLA)
At its core, Gross Leasable Area (GLA) refers to the total space within a commercial property that can be rented out to tenants. This includes areas exclusively used by tenants, such as storefronts, office spaces, and private storage rooms. GLA is typically measured in square feet and serves as a key benchmark for determining rental income and property value.
Unlike other measurements, such as Gross Building Area (GBA), which includes all spaces within a building, GLA focuses exclusively on rentable spaces. For instance, common areas such as lobbies, hallways, public restrooms, and stairwells are excluded from GLA calculations.
Spaces Included in GLA
To better understand what constitutes GLA, here’s a quick breakdown:
Included in GLA:
- Retail spaces in shopping malls
- Office suites in commercial office buildings
- Private storage areas exclusive to tenants
- Mezzanines or basements used by tenants
Excluded from GLA:
- Common areas like hallways and elevators
- Public restrooms and lobbies
- Mechanical rooms and utility spaces
GLA in Different Property Types
The concept of GLA is particularly critical in various commercial property types, such as:
- Retail properties: In shopping malls, GLA is used to determine the rental price for individual stores based on the size of the leased space.
- Office buildings: GLA helps landlords allocate spaces and set lease terms for tenants.
- Mixed-use properties: GLA becomes more complex in properties combining retail, office, and residential spaces, as each type of tenant has unique requirements.
By understanding GLA, real estate professionals can better evaluate properties and create fair lease agreements that benefit both landlords and tenants.
How is GLA Calculated?
Standard Measurement Practices
Calculating GLA requires adherence to established measurement standards to ensure consistency and fairness. One widely recognized standard is provided by the Building Owners and Managers Association (BOMA). According to BOMA guidelines, GLA is measured from the centre of shared walls or the exterior of outer walls, ensuring that all tenant-exclusive areas are accounted for.
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Step-by-Step GLA Calculation
Here’s a simplified step-by-step process:
- Identify tenant-exclusive areas: Measure all spaces within the property that are designated for tenant use.
- Include boundaries: Measure the area from the middle of shared walls (e.g., between two shops) or the exterior face of outer walls.
- Account for unique spaces: Include mezzanines, basements, or other tenant-specific areas in the calculation.
For example, imagine a retail store in a shopping centre with a ground-floor space of 2,000 square feet and an additional mezzanine of 500 square feet. The GLA for this store would be 2,500 square feet.
Common Challenges in GLA Calculation
While the process seems straightforward, there are several challenges to keep in mind:
- Property type variations: GLA calculations may differ based on the type of property, such as retail, office, or mixed-use.
- Lease agreement complexities: Lease terms can impact how GLA is calculated, especially in multi-tenant properties.
- Measurement discrepancies: Without proper tools, measurements may vary, leading to disputes between landlords and tenants.
Tools for Accurate Measurement
To ensure accuracy, many property managers and real estate professionals use tools such as laser distance meters, digital floor plan software, and even AI-powered analytics. These tools help streamline the calculation process and reduce the risk of errors.
Why GLA is Critical in Commercial Real Estate
Determining Rental Income
One of the most significant roles of GLA is in calculating rental income. Since rent is typically charged on a per-square-foot basis, knowing the exact gross leasable area (GLA) ensures landlords can set fair rental rates. For example, a property with a GLA of 10,000 square feet and a rental rate of $25 per square foot would generate $250,000 in annual rent.
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Property Valuation and Investment Decisions
GLA also plays a critical role in property valuation. Real estate investors often evaluate properties based on their potential rental income, which is directly tied to the Gross Leasable Area (GLA). A property with a larger Gross Lettable Area (GLA) typically offers higher income potential, making it more attractive to investors.
Gross Potential Rent (GPR)
GLA is a key factor in calculating Gross Potential Rent (GPR), which represents the maximum rental income a property can generate if all spaces are leased at market rates. For example:
GLA (sq. ft.)Rent per sq. ft.Gross Potential Rent (GPR)
5,000 $20 $100,000
10,000 $25 $250,000
Tenant Negotiations and Space Utilization
For tenants, understanding GLA helps during lease negotiations. A clear understanding of the space they are paying for ensures they get the best value for their rent. On the landlord’s side, GLA data allows for better space utilization and strategic tenant placement to maximize revenue.
GLA vs Other Real Estate Metrics
Key Metrics Comparison
To fully appreciate GLA, it’s helpful to compare it with other commonly used metrics in real estate.
MetricDefinitionIncludesExcludes
GLA Rentable space for tenants Tenant-exclusive areas Common areas, mechanical spaces
Gross Building Area (GBA) Total area of the building Entire structure Nothing
Net Rentable Area (NRA) Rentable space, excluding certain shared areas Tenant spaces minus shared spaces Common areas, lobbies
Usable Square Footage Space fully usable by a tenant Tenant-only areas Shared walls, structural elements
Why GLA is Preferred
While other metrics, such as GBA and NRA, have their uses, GLA is often the preferred metric for leasing and investment analysis due to its focus on tenant-exclusive areas. This makes it a more accurate reflection of a property’s income-generating potential.
Common Misconceptions About GLA
Misconception #1: GLA Includes All Building Space
One common misunderstanding is that GLA includes all spaces within a building. In reality, GLA only accounts for tenant-exclusive areas, excluding shared spaces like lobbies, hallways, and staircases.
Misconception #2: GLA is Static
Another misconception is that GLA is fixed once calculated. In fact, GLA can change over time due to renovations, tenant improvements, or reconfigurations of the property layout.
Avoiding Missteps
To avoid these pitfalls, always consult with a real estate professional or use standardized measurement tools when evaluating gross leasable area (GLA).
How to Use GLA to Maximize Your Commercial Real Estate Investment
For Investors
- Compare properties: Use GLA as a benchmark to evaluate the efficiency of different properties.
- Negotiate leases: Leverage GLA data to ensure fair rental terms and maximize returns.
For Property Managers
- Optimize tenant mix: Use GLA to strategically allocate space and attract high-value tenants.
- Increase revenue: Maximize the use of rentable space to boost rental income.
Future Trends in GLA Measurement
With advancements in technology, measuring and managing GLA is becoming more efficient. Digital floor plans, AI-powered analytics, and hybrid workspaces are transforming how Gross Leasable Area (GLA) is calculated and utilized in commercial real estate. Staying informed about these trends can help investors and property managers stay ahead of the competition.
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