Why Loss Factor Upsets NYC Office Tenants

[@rossmanngroup]

What drives me nuts about loss factor is that it ranges anywhere from 8% to 65% from my experiences and it tends to have nothing to do with the size or availability of the common areas. If it were standard across the entire field, or put in the listing, it wouldn't be as bad. Given that it is not a standard percentage, or made available in the listing, it makes square footage advertised a useless metric.

[@MetroManhattanOfficeSpace]

It is absolutely wrong that there should be a loss factor exceeding 5-10% for retail space. Retail tenants do not benefit or use building common areas. Even in the Wild West of New York City this unacceptable. For office space, the landlords can make a case about the necessity of generating income for common areas that they have purchased and that benefit the tenant on a daily basis. A tenant in an office building is going to use the lobby, the elevators and the restrooms. It would certainly be easier if New York City was like other major cities in the US and rentable square footage was equal to usable square footage and landlords added common area maintenance charges. But it is what it is in New York City and does not appear that this practice will be changed in the foreseeable future. It is important for tenants not to fixate on loss factor. Over the years I have seen situations with high loss factor spaces offered at a below market price per square foot. They below market price per square more than offset the above average loss factor. There are also scenarios where a space can have a below average loss factor but the layout is very inefficient.

[@Aeroxima]

Measuring it yourself seems to be the best bet, after all. Regardless of the intention, I would not want to pay for more than what I was actually getting. To me it feels a lot like these sites that streamline the experience and process to where you can give them money in one or two clicks, but lower the visibility of the account deletion button 6 different ways requiring a lot more clicks, leaving it just accessible enough to say "it's not our fault, it's right there, it's easy". Or like with hard drive space, they advertise the larger sounding way of measuring it, but at least there it doesn't leak and slide and get more and more exaggerated and made up, it's consistent and standard, so we can adjust.

[@sashasharman]

@@JinnaiT if he pinned it, he's seen it.

[@Lalfy]

@@JinnaiT It's not pinned

[@molewizard]

@@MetroManhattanOfficeSpace But why can't they just advertise both numbers so tenants can pick the one they're interested in? Isn't there a market for agents who can do this themselves?

[@Mugicha808]

My daily dose of watching something I have zero connection to. Absolutely fascinating.

[@7177YT]

agreed!

[@_DMAC]

Yup, here I am.

[@gskills]

Agreed

[@kyme32]

Same

[@emagotis]

4:54 this really makes no sense. If the landlord wants to make up for the the lost space he simply can up the rent per square foot. Doing it this way is deceiving for the tenant and is just troublesome, since he is not interested in space he actually can not use to make money. For me this concept looks like it was invented just to inflate the price per square foot without being truthful about it and not giving the tenant an actual measurement to compare space a bit easier.

[@MetroManhattanOfficeSpace]

You are 100% correct that this system makes it very difficult to compare space. Deceive is a very strong (too strong in my opinion) term. If landlords inflate the loss factor beyond what is reasonable their space will not be leased. Need to also view this in context. Sometimes you can have a high loss factor space with a below market price per square foot making the space a good value despite the loss factor.

[@kakurerud7516]

the idea is to do 'special math' to sell the better thing to make it appear better or comparable to others al also do the same thing. Remember when tv sets advertised in large numbers the 'size' and then in tiny letters noted viewable area which was always smaller. This is basic capitalism of legal misdirection. If you told the real numbers, you would look worse at a glance.

[@emagotis]

@@MetroManhattanOfficeSpace In Germany there is a law (Baunutzungsverordnung) since 1990 with 23 articles that regulates how the space has to be measured exactly depending where the building is placed, the type of building and what kind of use it serves to avoid confusion and fraud (which has happened less often since then) and strengthen the tenants position to make a more accurate choice. I agree that even without the law probably many landlords still would like to make a reasonable offer for their space. But if one of them starts to give deceiving numbers eventually others have to follow just to be competitive in the market. It's the same when you go shopping. The goods besides their selling price have to be labeled with their price per liter/kg/piece to make comparisons possible. How this is measured is also highly regulated. Of course the law for that is also highly complicated, but still it aims to make the choice for the consumer more save and prevent fraud from some sellers. And yes, some sellers as do some landlords have a disadvantage because of such laws, but I think that this system helps more people in this way than it would if everyone could make up their own numbers and own systems for how to calculate spaces or weights/units of products their are selling. And also, this doesn't make our system perfect, but since everyone has to use the same system it makes is somewhat fair and it is highly appreciated from customers and future tenants. Also it drives market competition quite a bit.

[@jazzyrick]

But that can hurt them if everyone else is using "funny measuring" and they use "real measuring" because it's the numbers that get potential renters in the building to begin with. So a real 2000 sq ft place renting for $18000 by "honest building owner" and 2000 sq ft for $15000 using "funny measuring" will generally get more people to come and look at the space...because it's "cheaper".

[@emagotis]

@@jazzyrick I think just use the same measuring, so you can compare. Loss factor without any explanation is just arbitrary.

[@adama7752]

Sounds like NYC just lies. Why not list useable and common.

[@Azeazezar]

Then the next obvious question becomes, why isn't loss factor advertised?

[@marcotestarmata]

Is it totaly arbitrary? It is like if you buy a pound of meat at 10$/pound but the butcher just give you half a pound because the cow has bone and skin.... It should just say it costs 20$/pound

[@eric4946]

Marco Testarmata this actually happens in some cases. Thankfully in most cases the butcher sets a price for bone in and out pricing .

[@poorpauly1308]

When you buy a gallon of gas, you expect to get the same amount no matter what station you go to. It is a law. Why can realtors get away with this and not gas stations or any other item that is sold by size or weight? Sounds like there needs to be a law.

[@Krmpfpks]

Very interesting. Here in Germany you are not allowed to advertise shared spaces as part of the rent, the shared spaces are divided in proportion to head count or rented square footage. But why did no one explain that to Louis when he walked around with a laser measure and called everyone a scam?

[@winnieid2727]

I'm seeing that "he doesn't want to listen". Lately i getting vibe that "he is too full of himself". Well that's my opinion as long time subscribers of his channel, people are free to disagree.

[@firsttpt]

"Loss factor" is being used as an excuse to mislead prospective unwary tenants. It's only because "people" keep saying things like "You just have to get used to it" that the practice continues.

[@margek.681]

WELL PUT!

[@kazolar]

I live in the tri-state area, an hour north of NYC via metro-north, so I'm familiar with NYC, prices and how they operate. It's interesting that in residential, you rent a 500 sqft studio in manhattan you get 500 sqft of usable space. If you buy a 500 sqft coop in Manhattan you get 500 sqft -- you pay a maintenance charge which goes for maintaining the common areas. The developer/landlord makes their money and the coop board is able to pay taxes and maintain the property. I don't understand how commercial real-state is so drastically different. Honestly feels like a way to make $/sqft look cheaper in one building vs another -- that's all -- just a numbers game.

[@alfoncejean8826]

let say you are a electronic repair shop looking for a 2k sqf space in order to exepend.And when you mesure with your bosh thingy you realise you don't actually have 2k sqf.... Exemple completely random, any resemblance with a realistic situation is totally axidental.

[@d.b.6240]

can i pay $5000 a month, but have a loss factor on my payment, so though I have given them an envelop with$5000 written on it, when they open the envelope it has only $3000 cash in it.

[@AppleMenace]

😂😂😂 🤷‍♂️🤷‍♂️ loss factor for the win!!

[@vilisinerva6476]

I understand the rationale of needing to pay for common areas, but is there a specific reason, other than it being established practice, to not achieve the same result with a higher price per square foot and a accurate measurement of the usable space?

[@Raider_MXD]

@Father Ted Of course it does matter. In other places clients can easily compare prices per square foot or square meter whereas here that's impossible because the numbers are absolutely random. To make matters worse, the loss factor applied doesn't even have to match up with the actual size of the common areas, i.e. to ensure that you're not getting scammed you'd have to take full measurements of the whole building and make your own calculations. That's just laughable.

[@jouniosmala9921]

Well in Finland, most rental agreements I have seen include two figures one with fully under tenants control and one that contains fraction of shared areas.

[@ericrotermund1004]

Jouni Osmala because science lol

[@darksidefloyd1]

Loss factor make sense. Why it's charged / factored in makes sense. Whats frustrating is if you need 2k sq.ft. of space you can't just find buildings with that amount of "usable" space. You only find advertised "lease-able" sq ft numbers. So now you have to know the loss factor for every space and calculate the usable space from the advertised "lease-able" space. I guess if everyone listed loss factor along with "lease-able" space then you could tell from the add how much space is available. It would seem easier to advertise "usable" space when locating a place with enough room for you. I would expect class A buildings to be more per Sq foot because you get more in common areas etc. But the marketing team has to advertise the biggest version of the sq ft number possible. Marketing sucks.

[@MetroManhattanOfficeSpace]

Unfortunately this is a convention in the real estate industry in New York. A knowledgeable broker goes a long way towards protecting tenants from an excessive loss factor.

[@dosgos]

Finally, I figured out the lighting scheme on the yellow glass sculpture behind you. Just the lights from passing cars outside being refracted.

[@Jonathan906]

Interesting! Fascinating aspect of building rental that hadn't ever occurred to me before.

[@Tom_Losh]

As a non-New Yorker what bothers me about The New York Way is advertising/leasing a false square footage for a space instead of the actual square footage plus a fee based on the percentage of common space in the building. Outcome (even the "cost-per-square-foot) is the same either way, but what the tenant is leasing, actually getting, is much more clearly spelled out. Great video once again!

[@molewizard]

Why don't they just advertise both numbers so tenants can search for the one they care about?

[@eidodk]

Loss factor is completely and uttterly illegal in my country. If you sublet apartments, you cannot advertise "rentable space" at all..

[@lukassnr1503]

I think there is misunderstanding about the nature of the issue. Majority of people would have no problem paying that extra for certain spaces if they would be happy with the space. But if you already have 1200 sq space and you are looking for expanding it creates unnecessary waste of time for both parties when the new viewed space is measured as 1200-1400 sq of usable space while it's advertised as 2000...

[@Psi105]

I think most people understand the concept of shared space in a building. What gets under peoples skin is that this extra-cost/less-space is presented in a dishonest/obfuscated way when it could easily be shown as increased cost per square foot. It would make total sense if a space with a large lobby had a higher cost per square foot than a equal space with no lobby. When a tenant looks for space to rent the first things they want to know about the space are; A) What's does it cost per square foot B) How many square feet does this space give me for my equipment / staff / stock C) What features does this space have. Lobby, Lift, Heating, Cooling etc. However, some of this information is intentionally hidden from them unless they look very closely. There are only two reasons i can think of for a landlord to obfuscate the true usable space instead of having a higher cost per square foot to cover their loss factor. 1) Because all the other landlords are doing it and if they choose to show true usable space it makes their property seem more expensive per square foot and therefore less desirable than others. (The "It's just the way things are" defense) 2) To attempt to trick potential tenants into signing a lease that seems good value for the size but is actually not good value at all. (The "I want to screw you out of money without you knowing" defense) None of those are good reasons to have a hidden loss factor system in play, so people get justifiable annoyed.

[@exapsy]

Thank you for the information. Although, from the point where I see it people are not frustrated because "there is a loss factor". But because tenants could mention that in the price to start with and not lie about how many actual space there is in the office. Because if I want to seek for a 2000 m2 space, and someone says to me that he has one, then I lose my time and monye to go there, and see that it's actually just 500 + loss factor, then he could have told me in the first place that there is a lost factor and the actual space is 500m2! Why does he have to bullshit me? Loss factor is a legitimate reason to raise prices, I agree, but it's also a bullshit reason to lie about how much actual space you've got when you could have included that in the price itself instead of the space.

[@loberd09]

So rentable sqft is basically the building total sqft divided by the number of “units” (so the wasted space is divided among tenants) and then the usable is more like what you’d get if you went into a “unit” with a tape measure.

[@martigrey5872]

It's just a scam. Give them a price for the space they actually get and a price for the common area that's not useable for you. What's the harm in being honest? It's just way more transparent and easy to understand for people who just want to rent an office.

[@MetroManhattanOfficeSpace]

Actually that is the way it is done outside of New York City. There are common area maintenance charges in addition to the rent for the space. However, the square footage of the space matches the measurement that the tenant was originally provided with. I would ask you for a moment to put yourself in the landlord's shoes. An owner needs to recover the costs of the common areas which they paid for when they bought the building.

[@alfoncejean8826]

@@MetroManhattanOfficeSpace I think we can agree for better or worse NYC is weird!

[@WolfySnowy]

@@MetroManhattanOfficeSpace In your video you've already proposed a possible solution. A maintenance fee for common space area. I can understand when there is elevator fee, when there is fee for maintenance of a car lot and so on. Where my price per foot could go up due to conveniences I get. However this cannot be one of the fields where you don't rent or buy... what is advertised. For one it can mess with a planning. Could come with disclaimer: "bring your own tape measure, we don't guarantee precise measurement". But if I rent a car with 4 seats, I don't expect that one of them might be gone. if I buy kilo of sugar, I don't expect it to be between 500 to 800 grams, because the paper is a loss factor. Then again I'm far away in Czech Republic, so this amazes me.

[@martigrey5872]

@@MetroManhattanOfficeSpace yes that's the way I know it. It works for every other landlord which is why I don't think it's actually necessary in NYC either. They obviously make their money back over time to pay for maintenance. Loss factor isn't transparent at all.

[@martigrey5872]

@@MetroManhattanOfficeSpace but thanks for the answer. You can count me in the category of people who'll never get it I think.

[@carlosedwardos]

I can't do loss factor, and I can't do maintenance charges, I'm sorry, I just can't. And this is not negotiable.

[@emagotis]

Also, a simple proof why this is deceiving practice - if there would be a actual 'loss factor' then they could just put a percentage to the advertised square footage. U believe the only reason they don't is to make comparisons between spaces harder and make the search for space a hellish nightmare. But at the end they of course could be also reasons I don't know about. Maybe they have to advertise as much office space as possible to get a better deal with a loaner bank. Or they have advantages when making their taxes. Well what the reason really might be, this is just malpractice in my eyes.

[@CharlesSchaum]

I get the term "demise" because it is related to "demesne," i.e., the territory under noble title in fee simple (thus, the feudal system) under the allodial rights of a monarch (such as in Norman England). And terms like "demise" meaning the transfer of use via will or lease make sense because property law and real estate terms come from "Law French" in England. But the common idea of "demise" as death derived from the "demise" that occurs with the transfer of titles and properties at death to a beneficiary. Some viewers might be confused if they don't know the technical terms or are not curious / history nerds. So even if you don't want to explain the terms, you might offer links in the description, e.g., www.lexico.com/en/definition/demise

[@bryandepaepe5984]

Another way to describe the situation would be that an empty store has the most usable floor space but when occupied the occupant puts in shelves, displays and a cashier counter, the amount of usable floor space is being reduced for each item being placed on the floor. Now the necessities need to be factored in like stairwells, interior dividing walls, utility closets and bathrooms all which reduce the usable floor space from the actual floor space which is determined by exterior walls and is the square footage stated by the original blueprints which are a matter of record at city hall.

[@ricnyc2759]

Do you remember that "stereotypical" thing people talked about? "Greed", "money hungry", "fraud", "dishonesty"?... It wasn't a stereotype... It's real.

[@drstampfli]

I am a landlord of buildings with office space. Many office buildings are clear-span, meaning that none of the interior walls are load bearing. All of the offices and walls that define them are built-to-suit by or for the tenant. I am leasing the entire space. If it's 40 by 100 then the lease is for 4,000 sq ft. The more walls a tenant wants to put up, the less "usable space" they will be able to measure (and use). I don't care where the walls are, or how many walls they have, or how efficiently (or not) they decide to layout the interior. These are all decisions and factors determined by the tenant. The space is still 4,000 sq ft regardless. I've had tenants design their own spaces and then complain that the sum of all their actual offices adds up to less than 4,000. These were the same clients that signed a lease and took possession of a 40 by 100 foot space. Edit: not in NYC btw

[@MetroManhattanOfficeSpace]

I very much appreciate a comment from a landlord! Do tenants in your building pay for any form of common area charges? I have heard that this is customary outside of New York City.

[@drstampfli]

@@MetroManhattanOfficeSpace I don't have any common area situations currently. Each space is single tenant, but yes, in the past I have had a few common areas - mainly conference rooms, entryways, hallways, reception areas, etc. Yes, that space was absolutely counted and divided proportionately between the tenants that used the space. The space exists for the tenants use and needs to be accounted for.

[@909sickle]

Great video title. Couldn't resist clicking on it, without being click-baity.

[@Zecuto]

Great educational channel. Interesting videos. Please keep it up!

[@muffinb5446]

Hey Alan, I would love to hear from you about the news in "Louis Rossmann real estate show". would be amazing if you could sit down with him and make a "episode" about what went down after this thing is done. keep up the great videos. kind regards Marvin

[@tracker001]

Thanks for the explanation of Loss Factor . Makes more sense now .

[@MegaMech]

In Canada many building owners don't live anywhere near the city the building they own resides in. I could see many landowners not wanting to spend extra time on their building and will really quickly figure out the numbers and leave it to potential renters to figure out the finer details themselves. My argument for the "common area maintenance charge" would be that your space would look much better to potential renters. If your building already has a hard time getting renters, doing the extra step for them would be a good first step to getting contracts signed. Customers who would be interested will visit. Customers who would never be interested will ignore the ad. Rather than getting all potential renters unfiltered and wasting your time, and their time.

[@a_lol_cat]

I'm amazed that a disclosure of usable sq/ft + loss factor sq/ft = what I'm gonna call total gross leased sq/ft isn't required. It's really no different than the truth in lending statement for example that you get when you do a car loan. You are required by law to be given specific numbers, how much is being borrowed, interest rate, term, ect. Also the "idea" that every square foot has to be generating revenue is honestly a childlike view of a business asset, and I can see why people with critical thinking skills find it so abhorrent.

[@therealmaku]

whatever that yellow glass thing is in the background is awesome -

[@vinceglartho]

This amounts to a lie everyone is telling.

[@feelmypain9]

Your video quality looks phenomenal on my new 4 K. Keep up the high quality

[@mok5364]

I love the sculpture behind you

[@ArthursHD]

High-rise buildings need a lot of support. In some designs it takes more then 1/3 of the building. By using CLT and SIPS or other structual foam in higher floors weight could be reduced significantly. With practical limit of about 10 floor building. People could get much more space in a given area. Planning indoor space also is important.

[@margyjr]

great explanation, Thank you

[@alduline]

This is great explanation, i heard louis talk about loss factor but understood it as making up money that is lost while the property is vacant. Thank you.

[@PosiP]

It took over 10 years to rent out the World Trade Center. Are building owners so rich they go without rent instead of lower the rent? How much of the New Tork office space is available? I would think a lot.

[@danf6975]

Awesome video Allen

[@thatdude5104]

Wouldnt it make sense to ask a higher price p square feet of actual usable space?

[@qlum]

Not when you are competing with other landlords. They may not even look at the advertising, if you offer a space that seems smaller on paper for the same price. This loss factor is probably something that slowly creeped up over time.

[@CobisTaba]

If I compare this to the situation in the Netherlands, I think we're doing it better. You explain this at the end of your video. What I would want is the advertisement to show the usable area and separately the common area that you pay for. It's fair the landlord wants money for this, but it's completely ridiculous to advertise with the higher number that people do not use.

[@tohopes]

It comes down to spaces being advertised with single numbers, which means that bigger will always be better and the landlord will have a strong incentive to exaggerate the one single number in order to compete with other landlords who will be competing in the same way. In a more technologically sophisticated (Internet- and computer-savvy) future, spaces will be advertised with floorplans, labeled with important dimensions, and so the overall square footage (and loss factor) of the space will be less important in prospective tenants' eyes.

[@dirtyspah]

Very interesting video. To an outsider, It seems that a common area maintenance charge is an objectively better way of handling this. The only advantage I can see to New York's process is that the landlord is _technically_ earning money on 100% of the space, but this seems like it's just semantics.

[@westnylefx]

Great informative video Alan.

[@Texas240]

Loss factor provides for some entertainment on the Louis Rossmann Realty Show.

[@Anatol_Tobler]

it shouled be a law against offering loss factor to be included in the offer. Make it 2 different numbers. 1. Usabel space and 2. Commen space. Whit that you can better know what is what. And not getting scammed by landlords. This is how it is donne mostly in Swizzerland whit the "rentcost" and (Nebenkosten) ?ancillary costs?

[@pourquoiunidentifiant]

Maintain and grow your channel. you may or not realized it yet but... you have here 2 things, 1: a good source of revenue (if you maintain and grow) 2: a veritable major source of free advertising for the properties you manage. you have a potential gold mine in your hands.

[@eric4946]

Loss factor is just a random “fee” your rent. An honest explanation would have both sqfts listed. It’s like having the mileage on a car listing without the year.

[@Teaspun]

My co recently went through an office relocation in Manhattan. I heard several explanations and justifications about the loss factor, but the one thing no one mentions is that it doesn't really matter. (Maybe it wouldn't go over well with the client.) At the end of the day, a prospective tenant will pull out his calculator and do this: (Total $$ I'll be paying for this space) / (Total usable square feet I'm actually getting) = Cost/Sq Feet. Then you consider location, amenities, etc. If all NYC landlords decided not to use the rentable square feet measure, the total rent payable for a place would remain exactly the same, you'd just pay more per square foot. It is what it is however you measure it.

[@Elkadetodd]

So list it that way. 1100sqft usable, plus 900sqft of apportioned loss factor.

[@toasterweeklydigestinc.861]

This is in the power of every realtor to do. This moron is defending the practice so he can take advantage of it.

[@chaos.corner]

@@toasterweeklydigestinc.861 A realtor that started doing this would likely see more satisfied renters too. It could become a trend. After all, Louis's endorsement of Alan is why his channel is taking off and that's because Louis sees Alan as trustworthy.

[@toasterweeklydigestinc.861]

@@chaos.corner I wouldn't trust Louis OR this guy, are you kidding? The guy is explaining why he uses fake number, and says it's ok because everybody else does it. What video did YOU watch...?

[@chaos.corner]

@@toasterweeklydigestinc.861 Alan is a broker, not a landlord (AFAIK) so it's not him supplying the numbers. He just seems to have drunk the kool-aid as many in this kind of situation seem to do. I'm just saying this is a potential opportunity for providing a better service to potential tenants than simply trying to get their percentage. You must know something about Louis that I don't because he seems like a guy who prides himself on operating with integrity and who values the same in others. But I'm not likely to ever be in a position to need to trust him so whatever...

[@ehsnils]

It's always important to realize what you get for your money and how much of the common areas you have access to and for what purpose. A huge entry hall with many shared conference rooms is not worth much for a business with few visitors but can be of great value for businesses that have many visitors that you want to keep in a "demilitarized zone" so to say. So I think both figures are of value - and what services that are offered in a shared area as some businesses have great use for a large goods elevator while others more or less just work with paperclips and laptops.

[@chriholt]

Very clear and logical explanation Alan, it was the main question I had when you were looking at spaces with Louis. Many thanks!

[@realShadowKat]

I do understand the need to recoup the cost of common areas, but it would behoove the landlords and leasing companies to reign in this before long. A start would be using the true square footage inside the tenant space as a selling point, implementing "no loss factor" leasing rates (we all know it would be built into the prices though). Get a mix of politicians in a high enough power (city, county, state) and the practice might come crashing down with legal regulation. Thank you for the videos Alan. 1pm eastern works well for me, since that's noon central and you're one person I wouldn't mind sharing a lunchtime meeting.

[@MetroManhattanOfficeSpace]

I agree with you. I wish I made the rules but I don't. Glad 1PM works for you. Glad you are enjoying the content.

[@Kakomajin]

While I understand why the common areas need to be considered, the ads should list the usable square footage and not a loss factor. In Germany you don't advertise a bigger area than the usable space, but the price per square feet would rise, if the common space includes features like additional elevators. Going with a loss factor is only to artifically increase the price per square footage without showing the tenants the real price per usable space. Basically trying to hide they are going above average price trying to hide it behind the loss factor.

[@MetroManhattanOfficeSpace]

In general, much more regulation and consumer protection in Europe than in the US. In Germany if landlords are only permitted to advertise useable square footage how are are common area and maintenance charges dealt with?

[@pankothompson5903]

Its so roundabout to not just have 2 numbers, monthly usable space rent and common facility charge.... subtotal.

[@Brandon-vq9qi]

Great thumbnail!

[@spik330]

I'm not in NYC but I'm a deal with a no shit no crap. I hate when sales tax isn't on the price tag of items in a normal store. So you as a landlord should advise the size of the the place that I can use. If you have common areas, that should be included in the price. The place should not be advised as something bigger that what I can't have control of.

[@Raider_MXD]

In other places there are regulations that require that the numbers provided by the landlord match up with the sum of the size of the rooms the tenant rents. Adding in common areas with a factor that the landlord basically determines as he wishes is nothing but a scam.

[@cgibbard]

It doesn't quite seem fair for every tenant to be paying the same rate for common areas as for their usable space, as that means if there are 20 tenants, the common areas end up being paid for 20 times over. I think most tenants would be happy to pay their fair share on that space - some fraction according to what proportion of the rest of the building they were renting alongside the other tenants - but that isn't how it works. There is definitely an argument that those common areas are more expensive to maintain than the rest of the space in the building (elevators are expensive, bathrooms need constant upkeep), and even that the expense increases somewhat with the number of tenants -- more people moving through the space is likely to mean more wear and tear. It seems unlikely however that the costs would be such that having every tenant pay the full rate on those spaces makes sense. In any case, perhaps a more precise accounting of the costs involved and how they're shared by everyone in the building might make tenants more comfortable paying for them. The status quo seems like it would typically benefit landlords quite a bit though, so I wouldn't expect it to change unless there came to be much stronger competition between landlords to get tenants into their spaces.

[@thetrashcanman199]

You have now entered the spin zone

[@MetroManhattanOfficeSpace]

Please remember that I don't make the rules. I make my best efforts to protect my clients and to negotiate the best value for them whether it is procuring a low loss factor space, a favorable per square foot rent or a generous build out from the landlord. Personally I do think that it would be fairer if the discrepancy between "useable" and "rentable" was eliminated and the tenant was charged common area maintenance charges.

[@toasterweeklydigestinc.861]

You make the rules in every listing you advertise. DO BETTER

[@carlosedwardos]

I can't do loss factor, and I can't do maintenance charges, I'm sorry, I just can't. And this is not negotiable.

[@Juicymamaa]

I love your video, very informative

[@msears101]

Why not market the usable square footage? Wouldn't that be more of a genuine offer?

[@margek.681]

@@Sloyfa *EXACTLY!*

[@Marxone]

So it's just a marketing scam how to advertise lesser price per square foot. If everybody would just use the usable space metric and the cost of common areas will be included in the price, it might actually serve the purpose to promote "how good this building is" in the initial price without need to use some math. Rather than "oh look, you have the same price per square foot but you got half the usable space, because this ain't a shithole like that other building".

[@Marxone]

I wonder what is the psychological effect on the tenants, specially from the outside who want to expand into NYC. Either you want to move in there if you see that the rent price ain't that higher than elsewhere, but when in the reality you get less space than in some other parts of the country. I bet small businesses must hate NYC :D

[@JDFuchs]

Thank you for teaching me a new term. I'm just starting to venture into commercial real estate and this is important to know. Question for you. If a space for lease is in a multi tenant property how exactly is the loss factor divided between tenants? I'm assuming its based on the useable space % compared to other units sharing the common areas. An example: one unit is 10% of the building so they cover 10% of common area square footage. I can see many special case situations where this would not be the best formula to use though.

[@RBLXGaming23]

This must be what it's like watching Louis Rossmann's dad's channel, if he had one.

[@madbstard1]

Alan, are you holding an alien hostage in there? There is a reflection in the window over your left shoulder that looks suspicious lol. Great video again. Was fascinating to hear a proper explanation of loss factor vs usable footage. Still think though, that it is almost fraudulent the way that some brokers/landlords advertise against what is actually usable,

[@spacejaga]

As always nice video. By the way I noticed your channel isn't strongly growing. You should look more into words and phrases you are using in descriptions and tags. Have nice day o/

[@MetroManhattanOfficeSpace]

Are you saying to incorporate keywords into titles and tags? How would that enhance growth?

[@margek.681]

Or just making videos that are honest and truthful without spin. Stop justifying false specs in a listing. If you made a video that said "this is loss factor and how it is misleading and this is why I list MY listings differently and honestly" you'd have 100 times the views. But you're too short sighted to see this.

[@georgeburns5811]

Love your videos. They are so informative. Only in New York City would such a stupid and deceptive practice be allowed.

[@therealmaku]

while i can follow what you are saying about the loss factor being passed on to the tenants via defining a size that is more than is actually there, why not just make an accurate statement and a separate line item saying "and 300 sqft % charge for common areas in building" - it would be more transparent. you mention this around 7:25. good video, good audio, good content.

[@sl00p3r]

Interesting... The lesson here. Don't rent commercial space office or otherwise in NYC unless you want to be ripped off for space you can't use. Or, if you do go looking understand that the landlord is actively looking to rip you off.

[@Aeroxima]

Or measure things yourself, maybe starting with asking about the actual usable space ahead of time just in case they want to play nice. It would be nice if the broker could keep a list of actual measurements, I know that's what I'd be doing. Work those spreadsheets (or perhaps databases). Hell, I've done that twice recently just for buying a couple $400 items, a list of relevant information and tradeoffs and price per whatever.

[@anthonymarshallprugel]

This is very insightful. Thank you

[@nematube]

Isn't there any regulation or recognized industry standard of calculating usable areas and secondary/common areas to come to a fair nominal square footage?

[@chocolate_squiggle]

Totally appreciate that things are done differently in different locales, however this would drive me crazy too . You're right a good broker can save time and confusion in this respect. For the uninitiated though it just seems like a colossal waste of time. There's a cost to setting aside time and travelling to see spaces that are never going to be suitable. It's interesting how you put it, that the landlord has to earn an income on every square foot. Is that something that historically was mandated by finance lenders? I suspect because corporate negotiators aren't spending their own money and they are the bulk of the customers, is the reason why this practice continues - it's just ingrained and the employees doing the leasing on behalf of corporations just accept it and carry on doing what they've always done. Personally I wonder why the communal areas isn't part of the landlords cost of doing business - they can't legally rent out spaces without bathrooms, and you can't expect people to climb up the side of a building and crawl into their offices through the windows. But if they are going to put it back on the tenants then it would be greatly preferable to add the appropriate percentage onto tenants usable square footage rate. Thanks for explaining it to us though :-)

[@panagiotischristo]

Great video...

[@dumtiedum5563]

Hi I watched a few videos of yours and you are getting with each video more conformable with talking directly into a camera. Maybe you can try out with someone else in the room with you behind the camera which you can communicate directly to. Don't be shy to experiment as you are starting out :) great and interesting content nonetheless

[@ПётрБ-с2ц]

You said that this is a very reasonable explanation but I can't say it is. I still can't see how being upfront about area of the space takes profits of landlord away. Is there some hidden dependency?

[@ПётрБ-с2ц]

Why can't landlord can charge same rent and be honest about the area?

[@RamkrishanYT]

It's the real estate version of why ssd is missing 160gb

[@sabriath]

So basically, NY handles space completely different than the entire country because the square footage is manipulated to add in the space that the landlord has "lost"? I don't know how this can possibly be considered good practice, or why no one has ever thought to legislate what amounts to pretty much what the entire country is already doing.....reporting the footage precisely or rounding down only. I understand that tenants may decide to change layouts and lose footage based on paneling, but the calculation should be simply the entire area that the tenant has access to alter (so bearing wall to bearing wall, minus loads). The whole "add in" for the footage that isn't "making landlord money" is rubbish because that should be part of the pricing, not the footage. As per your example, a 10 story building with 8- 5,000 square foot units, but with a loss factor of 10,000 square feet for common areas, if the going rate for a 5k unit is $300,000 ($60psf), then the landlord should simply raise the rates to $375,000 ($75psf), but the noted square feet shouldn't change. The idea should be that "if it's nice, then it should cost more"...therefore if a building is 20% common area (which is quite a huge area, so probably a lot of elevators, bathrooms, lobby, etc.), then it's "nice" and would cost more. "You get what you pay for" should be a thing, so if you're looking for the same square footage but at the cheapest rate, then you should be expecting to get some hole in the wall spot.

[@mightbesherwood1313]

I got your loss factor right here: WeWork.

[@stevecory4160]

Thankyou mang

[@emagotis]

2:57 I won't believe there could be reasonable answer.

[@_DMAC]

People have a hard time with loss factor, but like in Loius' scase, weren't some of his a bit crazy amounts of loss factor? You still working with Loius or has he given up the search?

[@stoperos]

So if you want to buy 10 galons of gas they don't charge you margin and tax extra over base price but give you 5 galons and will say yes yes this is 10... yeeeenoooo.

[@Righttorepair880]

thank you!

[@DrLegitimate]

This is interesting, but I think potential tenants are mad not because of the idea of 'loss factor', but because it's not listed, and landlords and their listings end up wasting everyone's time. People just don't want to waste time and they want to know what they are buying without having to take their own measurements.

[@DJMishaGrin]

Very cool

[@tabba1376]

*EVERY REALTOR WHO WANTS TO CAN FIX THIS- JUST MEASURE THE SPACE AND ADVERTISE IT HONESTLY IN YOUR LISTINGS. BOOM! PROBLEM SOLVED. BUT THEY DON'T, BECAUSE THEY CAN GET MORE BY DEFENDING THE PROBLEM AS SOME "GLITCH" IN THE SYSTEM.*

[@jayceedee5807]

If you don't put a floorplan in your ad as a landlord, you're either trying to actively scam people or unprofessional.

[@PhilipHousel]

Do you help clients with what usable space they are looking for as you help them filter through the jungle of the Manhattan?

[@adkjfasldkf]

I appreciate the explanation, but it does not justify the behavior. It is 100% an attempt to trick tenants. They could advertise it as 1000sq private space and 600 sq of shared space, but they don't. They hope that tenants don't measure and get screwed.

[@Ekitchi0]

I was waiting for the reasonable explanation but it's not reasonable. This practice is actually illegal in countries with a strong consumer protection system (not the US). As a business, selling a service, you tell the consumers what they are getting, not what you are using for it... otherwise you are engaging in anti competitive and anti consumer behavior. The extra expenses simply go into the price, you don't inflate the description of the service you are providing, you only inflate the price to cover the expenses. When you go to a restaurant, there is a good amount of waisted food at the end of the day. You account for it in the price of your dishes, you don't tell your clients you are selling them a 1pound steak but due to losses in your inventory you only serve them a 0.5 pound steak... The proper way is to give the usable space, then mention the common areas the tenant will be using and set the price according to what the landlord needs. Set the *price* not the description! Tenants will always be angered at a dishonest and anti consumer practice. You can explain it, but it doesn't make it ok. It's not that they don't understand, it's simply that it's not right. It makes looking for a space that much more work because you have to measure all the places yourself to know what you are actually getting. And that's the actual point for the landlords: make it harder for the tenants to compare places and settle for bad deals due to the effort required to look for more places.

[@ericrotermund1004]

Why not just list the size and a fee for the amenities. One would think for regulation obsessed NYC this would be illegal. I wonder why you can’t sue them for fraud. Its clearly wide spread fraud.

[@RussellD11]

Well It SHOULD, as its called LYING..........