What does the loss factor, or R/U factor, measure?

The loss factor, also known as the rentable/usable (R/U) factor, quantifies the difference between rentable square footage and usable square footage within a commercial property.

In a typical commercial lease, a tenant pays rent based on rentable area, which includes usable space and a proportionate share of common areas (like hallways, lobbies, and restrooms). The usable area is the actual space a tenant occupies and can utilize for their business activities.

The loss factor indicates how much space is not directly usable by the tenant but is included in the total rentable area. It is calculated by taking the difference between the total rentable square footage and the usable square footage and helps tenants understand how much of their rent contributes to common areas rather than their own operational space.

Understanding the loss factor is crucial for prospective tenants, as it influences their effective rent and indicates the efficiency of the space they are leasing. Thus, option B accurately captures this concept.