A loss factor that expresses the percentage of gross rentable/ usable square space (especially commercial real estate) that is added to the tenant’s physical occupancy. This percentage of a building’s gross rentable/ usable space is added to a tenant’s rented space in order to come up with its total rent.
An add-on factor is calculated as the difference between rentable space and any space within the premises that is deemed unusable (being in the private use of a tenant). Private use implies the use of an area by a tenant without having to share the space with other tenants. Common area space is treated as part of the add-on factor. In general, the rent or lease payments that tenants pay constitute the rentable space, while taking into consideration the limited use of such common spaces.
The add-on factor is an essential input in setting lease rates.
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