Net Leasable Area

Net leasable area is a term that describes the actual amount of floor space in a building that can be rented to tenants.

This is not necessarily the total amount of floor space in a building or the land area.

A commercial development such as a shopping mall for example, would have a total floor area that includes space for walkways, parking, recreation, etc, that was built for the reason of managing the premises.

However, only the space set aside to rent out to tenants such as retailers and service providers are leasable area.

Mall owners understandably would want to have as much NLA as possible to maximize revenue.

But during the planning phase of construction, they would be mindful of having a NLA ratio to actual floor area that is too high.

The higher the ratio, the less pleasant an experience it might be for people to visit the mall.

The total of all the leasable area would be the net leasable area for a particular property.

By dividing the total rental collected from tenants with the net leasable area taken up by tenants, an average rental price per square feet can be determined to show an indication of the rental prices.

This can be used as a basis as part of the decision making process that potential tenants go through when evaluating whether to rent a particular store space.

For example, if the landlord’s proposed rental is higher than the average rental, then the retailers might present a lower price as part of negotiation.

It must be noted that using the average rental of NLA might not be a good indicator of a location’s real value as a lot depends on the flow of traffic configured by the mall owner.

Shops located at the main entrance of a shopping center for example, tend to command premium rental compared to those located at the upper levels where patrons have to make an effort to climb that high.

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