A Brief Overview of the New BOMA Measurement Standards for Lawyers Jan. 20, 2011 By William B. Tracy, MBA, NCARB

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1 1) The BOMA Standard for measuring Floor Area in Office Buildings a) Commonly called The BOMA Standard b) Voluntary ANSI consensus standard since 1915 i) Multiple reincarnations (1) To stay relevant to market leasing practices (2) To increase clarity (3) To meet ANSI 10-year review requirement (since 1956) ii) Terminology has changed (1) Usable Area (1980 present) still Usable Area (a) Space physically occupied by people, furniture & equipment (2) Net Rentable Area now archaic ( ) now Rentable Area (a) Usable Areas plus common areas (3) R/U Ratio (1980) now Load Factor (a) R/U = Rentable Area divided by Usable Area (b) Used to allocate common areas to each tenant c) Best known measurement standard cited in more than just lease agreements i) Development agreements ii) Build-to-suit agreements iii) Purchase agreements iv) Sale/leaseback agreements. d) Historically, an office measurement standard intended only for office space i) Store Area addressed only as ancillary use. ii) Commercial real estate has five main products (1) Office (2) Industrial (warehouse, distribution, factories) (3) Retail (including stores, entertainment, health clubs, restaurants) (4) Multi-Unit Residential (apartments & Condos) (5) Other (a) Hotels, civic buildings, parking, etc (b) SF is not as important as 1 4 (c) # rooms, seats, stalls, & other measures of size used for leasing iii) Each product has unique practices & terms relating to floor area measurement (1) Measurement and management are integrated (2) Property management differs between products iv) BOMA Office Standard often misapplied to non-office product (1) Doesn t respond to custom & practice for management of other products (2) Creates uncertainty & disputes Page 1 of 7

2 2) BOMA saw a need for and has developed and published a measurement standard specific to each product. All are American National Standards. a) Office Buildings: Standard Methods of Measurement ANSI/BOMA Z b) Industrial Buildings: Standard Methods of Measurement ANSI/BOMA Z c) The Gross Areas of a Building: Standard Methods of Measurement ANSI/BOMA Z d) Multi-Unit Residential Buildings: Standard Methods of Measurement ANSI/BOMA Z e) Retail Buildings: Standard Methods of Measurement ANSI/BOMA Z f) Mixed-use properties: to be published in June, ) Industrial Buildings Z65.2 a) Applies to warehouses, distribution centers, assembly (factories) & flex space b) Jointly produced by BOMA & SIOR c) Similar in concept to BOMA Office Standard (Usable & Rentable Areas, etc.) d) Two methods: i) Method A Exterior Wall Method (most common) ii) Method B Drip Line Method (common in south no walls) e) To cite unambiguously, must specify Method(A or B) in addition to Standard f) Written in 2004 (prior to Gross Area standard) update in progress 4) Gross Area Z65.3 a) Applies to all buildings and product types b) Two measures of gross area: i) CGA - Construction Gross Area (includes balconies, roof terraces, etc) ii) EGA - Exterior Gross Area (only fully enclosed space with exterior walls & a roof) (1) Also called GBA - Gross Building Area c) To cite unambiguously, must specify EGA or CGA in addition to Standard. d) Single tenant office buildings: i) Rent rate often based upon Gross Area (generally EGA) (1) Sale / lease-back (2) Build-to-suit ii) Do NOT cite 2010 BOMA Office Standard! (1) BOMA-96 included Gross Building Area in Standard (2) BOMA-10 Office standard explicitly excludes Gross area (a) BOMA-10 Office defines only Rentable Area (b) If you want Gross Area, cite BOMA Gross Standard Z65.3 (c) Terminology is important may imply a measurement standard e) Foundation for Retail & Multi-Unit Residential standards i) Also for Industrial standard re-write Page 2 of 7

3 5) Multi-Unit Residential Buildings Z65.4 a) Apartments b) Condominiums i) Subject to state statutes re: Unit Boundaries (1) Uniform Common Interest Ownership Act (2) Uniform Condominium Act ii) Disputes net (platted) versus gross (marketing, listing) c) Measures both units and common areas entire building i) Excludes non-building common area (sidewalks, parking, landscaping, etc. ii) This is typical of ALL BOMA standards site improvements not addressed. d) Jointly produced by BOMA, IREM, NAHB & NMHC e) Two Methods: i) Method A Unit Gross (unit area includes perimeter walls, ½ adj. units) ii) Method B Unit Net (face of wall) (1) Leased units: face of GWB (2) Owned units: GWB is within unit f) To cite unambiguously, must specify Method(A or B) in addition to Standard i) BOMA makes no recommendation which Method to use ii) With condos, consider showing both Net & Gross unit areas g) Based upon BOMA Gross Standard i) Measures balconies, roof terraces & similar limited common areas 6) Retail Buildings Z65.5 a) Targeted at shopping centers, strip malls, big box, etc. i) Does not address leasing on basis of usable area ii) Significantly different than BOMA-96 Store Area whole new animal (1) No allocation of common area square footage (2) Occupant Area boundaries different (lease line, ext. walls, not DP) (3) Allows for Ancillary Areas (a) Unenclosed dining patios (b) Unenclosed garden centers (4) Addresses Kiosks, Retail Merchandising Units (RMUs) and food courts b) ONE Method Gross Leasable Area (GLA) i) Terminology is important (1) GLA may indicate BOMA Retail Standard even if not cited (2) Rentable Area may indicate BOMA Rentable Area even if not cited c) Based upon BOMA Gross Standard - EGA 7) Office Buildings Z65.1 a) Applies only to office occupancy i) A building converted from retail to office will have different square footage! Page 3 of 7

4 (1) Rentable Area is different from Gross Leasable Area (2) Example grocery stores converted to call centers ii) Can be applied to office portion of mixed-use building b) Supersedes 1996 BOMA Standard continues & expands i) Originally released by BOMA in December, 2009 ii) Approved by ANSI May 11, 2010 c) Major new features i) Drivers: (1) IFMA/BOMA Unified Approach to Measuring Floor Area in Office Buildings for use in Facility and Property Management & OSCRE (2008) (2) Incorporate existing leasing practices (a) Single load factor for all floors of multi-tenant multi-story building (b) Separately lease tenant storage areas based upon usable SF (c) Accommodate regional leasing practices external circulation (3) Coordinate with BOMA Gross Area Standard (4) Incorporate BOMA 26 Q&A document (5) Make standard less ambiguous and clearer (a) More definitions & discussion (b) More and better illustrations (i) more floors basement for first time since 1952 (ii) Includes enclosed, structured parking levels. 1. Parking measured under BOMA-10, but excluded from Rentable Area ii) New terminology BOMA-10 versus BOMA-96 (1) Occupant Area replaces Office Area and Store Area (2) Service & Amenity Area replaces Common Area (a) Service Area : Lobbies, corridors, restrooms, mechanical & electrical, etc. (b) Amenity Areas : Shared conference rooms, exercise areas and similar free amenities that landlord could convert to Occupant Area. 1. Example: Exercise Room previously free to tenants a. Occupant Area if leased to operator who sells memberships to tenants (3) Interior Gross Area (IGA) replaces Gross Measured Area (a) IGA Boundary includes 9 conditions two of note (i) Dominant Portion (finished surface constituting 50% of vert.fl.-clg. dim.) 1. Same as BOMA Majority of conditions, therefore 3. IGA similar to GMA under BOMA-96 except for a. Voids (excluded) b. Parking (included) (ii) Ownership Change (at Property Line) re: divided building Page 4 of 7

5 (4) Load Factor replaces R/U ratio (5) Public Pedestrian Thoroughfare replaces Street Frontage (a) Street Frontage was an undefined term in BOMA-96 (6) Void is a subset of BOMA-96 Major Vertical Penetrations (a) Upper atriums, upper auditoriums, and similar open-to-below spaces (b) Not included in IGA totally excluded (like the great outdoors) (c) MVPs (stairs, elevators, HVAC shafts, etc.) still part of IGA but excluded from Rentable Area (7) Table in appendix sets out equivalent terms between BOMA-96 and BOMA-10 (a) Leases still use BOMA-96 terms like Common Area iii) New Features (1) Application of Floor R/U ratio to Building Common Area eliminated (a) Will make rentable areas more stable (reduced volatility) (b) Will result in shift of rentable area between floors when converting from BOMA-96 (2) Allows unenclosed Exterior Circulation in certain circumstances (a) Feature of buildings in warm climates (b) Only if no interior corridors (c) Only part of BOMA-10 that can increase building total Rentable Area (3) Deduct certain Tenant Storage areas and lease separately based upon usable area (4) Consistent method of dealing with building having high load factors (5) Required disclosures (a) Restricted Headroom (< IBC) (b) Certain Mezzanines (c) Vault space (below grade outside property line) (d) Connectors (enclosed bridges & tunnels between buildings) (6) Two Methods (a) Method A - Legacy Method (i) Emulates BOMA-96 multiple load factors unique to each floor (ii) Total RSF generally the same as BOMA-96 in most buildings unless Exterior Circulation exists. (iii)rentable Area differences from BOMA Floor R/U ratio not applied to Building Service Area 2. Rentable Areas of individual floors & tenants will change (iv) May be best for certain buildings or if documentation limited (b) Method B Single Load Factor Method (i) Building Total RSF identical to Method A (ii) Distribution of RSF between floors is different (iii)how it works: 1. Establish Rentable Area of the Building Page 5 of 7

6 2. Establish Occupant Area of the Building a. Establish Base Building Circulation on every floor i. Minimum corridor for access to tenant suites, restrooms, egress, elevators, building service areas, etc. b. Measure Occupant Area not including BBC 3. Calculate the Load Factor for the building a. Numerator = Rentable Area b. Denominator = Occupant Area 4. Rentable Area of each floor its Occupant Area times Load Factor (iv) Establishes Rentable Area for each floor, regardless of multi-tenant or single tenant occupancy 1. For full-floor tenant calculate Full Floor Equivalent Factor a. Not use in leasing b. Comparable to Method A Load Factor for a full floor tenant (v) If additional corridors are needed on a multi-tenant floor, Extended Circulation is added to the Occupant Area of the tenants requiring it. 1. Extended Circulation can also exist under Method A a. Corridor extended after leases signed on old R/U ratio b. Supported by BOMA-96 / 26 Q&As #11 2. Leased by tenant but not part of premises 3. Impact on lease language? (vi) Method B requires careful documentation 1. Base Building Circulation is not actual corridor! 2. BBC boundaries must be documented with CAD or paper plans. (c) To cite unambiguously, must specify Method(A or B) in addition to Standard iv) BOMA-10 still includes (1) 2% tolerance (2) measurement dispute resolution procedure (3 rd party) v) Which is better, BOMA 96 or BOMA-10? (1) BOMA 10 is less ambiguous in its application (2) BOMA-10 has more stable rentable areas over time (3) BOMA-10 requires certain disclosures vi) Which is better, Method A or Method B? (1) Method B a boon to leasing! (2) Method B inherently more equitable (a) Eliminates inequitable variation of Load Factors between floors (3) Biggest challenge is converting from BOMA-96 (a) RSF on certain floors will be lower (b) RSF on certain floors will increase approx. 4% in one study Page 6 of 7

7 DISCLAIMER This outline should not be construed as an interpretation of any BOMA Standard. The user of any BOMA Standard is responsible for knowing and interpreting the provisions thereof based only upon the contents of the published standard, not including this outline. ABOUT THE AUTHOR Bill Tracy is Principal Metrologist 1 at Building Area Measurement LLC, and provides consulting, training and dispute resolution services relating to practices and standards of commercial space measurement. He is currently Vice-Chair of the BOMA International Standard Method of Measuring Floor Area Committee and has been closely involved in the drafting of all BOMA measurement standards since For more information on Bill, and on measurement standards, please refer to his web site 1 A metrologist is one who practices metrology, the science of measurement. Page 7 of 7