Gross Leasable Area: Definition, Importance, and Calculations

In commercial real estate, Gross Leasable Area (GLA) is a key metric that determines the rentable space available to tenants. From retail spaces to office buildings, understanding GLA is critical for property owners, tenants, and investors. It directly impacts rental income, leasing agreements, and property valuation.

This article explores the concept of GLA, its calculation, and its significance in the commercial real estate industry. Whether you’re a tenant negotiating a lease or a property manager maximizing revenue, understanding GLA is essential.

What Is Gross Leasable Area (GLA)?

Gross Leasable Area (GLA) refers to the total floor area within a commercial property that is available for leasing to tenants. This includes all usable spaces such as retail shops, office suites, and storage areas but excludes common areas like hallways, lobbies, and shared restrooms.

Key Features of GLA:

Exclusive Use: Only spaces leased or available to specific tenants are included in the calculation.
Customizable for Tenants: Tenants can use the space for their specific needs, such as retail displays or office setups.
Applies to Various Properties: Common in shopping centers, office buildings, warehouses, and mixed-use developments.

How to Calculate Gross Leasable Area

Calculating GLA involves measuring the total area within the tenant’s leased or leasable premises, including any mezzanines, storage areas, or back rooms.

Formula:

GLA=Total Floor Area Used by the Tenant (in square feet or meters)\text{GLA} = \text{Total Floor Area Used by the Tenant (in square feet or meters)}

What’s Included in GLA?

Tenant-exclusive spaces such as offices, retail shops, and storage areas.
Any internal walls or partitions within the tenant’s leased area.
Space used for operational purposes, like stockrooms in retail stores.

What’s Excluded?

Common areas like lobbies, hallways, staircases, and elevators.
Parking lots and exterior spaces shared by multiple tenants.

Importance of Gross Leasable Area

Determining Rent

Rental rates for commercial properties are typically calculated based on GLA.

Example: A retail shop with a GLA of 2,000 square feet renting at $50 per square foot per year will pay $100,000 annually.

Property Valuation

GLA plays a critical role in determining the overall value of a commercial property, as it reflects its income-generating potential.

Tenant Planning

For tenants, GLA provides a clear understanding of the space available for their operations, helping them plan layouts and usage.

Marketing for Landlords

Property owners use GLA to attract potential tenants by highlighting the rentable area and its features.

Operational Efficiency

GLA metrics allow property managers to optimize the layout and maximize the use of rentable spaces, improving profitability.

GLA in Different Property Types

Retail Properties

In shopping malls and strip centers, GLA includes the total space used by individual stores.
Example: Anchor tenants like department stores typically have larger GLA compared to specialty retailers.

Office Buildings

GLA in office buildings consists of the floor area leased to each tenant, excluding shared spaces like lobbies and corridors.

Industrial and Warehouse Properties

GLA for industrial properties includes manufacturing areas, storage rooms, and operational facilities exclusive to tenants.

Mixed-Use Developments

In properties with both retail and residential units, GLA calculations are typically separated by use type.

Factors That Influence GLA

Building Design:
Properties with open layouts may have higher GLA compared to those with extensive common areas.
Tenant Requirements:
Customizations like mezzanines or additional storage can increase the GLA for specific tenants.
Zoning Regulations:
Local laws and zoning codes may dictate the maximum allowable GLA for certain property types.
Renovations and Expansions:
Upgrades to a property can increase its GLA, boosting rental income potential.

GLA vs. Other Real Estate Metrics

Metric	Definition	Includes Common Areas?	Usage
Gross Leasable Area (GLA)	Total rentable space exclusive to tenants.	No	Calculating rent and tenant planning.
Gross Floor Area (GFA)	Total floor area within the building, including common areas.	Yes	Property valuation and planning.
Net Leasable Area (NLA)	Similar to GLA but may exclude walls or unusable areas.	No	Used in lease agreements for clarity.

How to Maximize GLA Utilization

Optimize Layouts

Design flexible spaces that can be customized for different tenant needs.

Reduce Non-Leasable Areas

Minimize common spaces to maximize the proportion of GLA in a building.

Attract Anchor Tenants

Large tenants can drive traffic and encourage smaller businesses to lease adjacent spaces.

Incorporate Multipurpose Design

Create spaces that can serve multiple functions, such as combining retail with storage.

Regular Maintenance

Keep spaces in good condition to attract long-term tenants and maintain high occupancy rates.

Conclusion

Gross Leasable Area (GLA) is a vital metric in commercial real estate, influencing everything from rental income to property valuation. For landlords, it’s a tool to optimize revenue, while for tenants, it clarifies how much space they’re leasing.

By understanding and effectively managing GLA, stakeholders can maximize the potential of their properties, ensuring profitability and tenant satisfaction. Whether you’re leasing space or managing a property, keeping GLA in mind is essential for long-term success in the real estate industry.