Meta Description: Learn what GLA means in real estate, how it is calculated, and why it is important in a property’s valuation, leasing, and market trends.
| Definition | Description | Inclusions | Exclusions |
|---|---|---|---|
| GLA in Commercial Real Estate | The total floor area designed for tenant occupancy and exclusive use. | Basements, mezzanines, upper floors, and internal walls not shared with other tenants. | Common areas like lobbies, restrooms, stairwells, and mechanical rooms. |
Within real estate, there are several performance metrics that are used to assess property value and use. One of them, GLA or Gross Leasable Area, is an important metric when it comes to commercial property management. So, what is GLA, and why is it so critical?
What does Gross Leasable Area (GLA) mean?
Defining GLA
Gross Leasable Area (GLA) is the total floor area within a building that is rented to or can be rented to tenants. This metric generally measures only the amount of space that is directly leasable, excluding for example public restrooms, maintenance rooms, stairwells, or common lobbies. So, GLA is basically the areas that fill up the pocket of property owners.
The GLA, for instance, in a shopping mall includes stores, restaurants, and kiosks, but does not include hallways or public restrooms as they are common areas and cannot be rented out individually.
Common Uses of GLA
GLA is an important metric in commercial real estate transactions. It is used to:
- Estimate the rental income: The amount of space that can be leased has a direct effect on the rental price.
- Assess property value: Buildings with excess GLA are typically valued at a higher price point because their space can potentially increase revenue.
- Help review leasing agreements: GLA is used by tenants and property managers to determine the lease terms and rental rates.
GLA stands for Gross Leaseable Area, and this helps property owners and investors to quite effectively decide how to go about buying, selling, or leasing property.
Why is GLA Significant in Commercial Properties?
One significant factor is property valuation
Within commercial real estate, GLA is a key metric in determining property value. A more significant leasable area refers to one’s ability to generate more rental income, rendering the property more enticing to an investor. For instance:
- Assuming rental prices are in the same ballpark, a retail centre with 50,000sq ft of GLA provides much greater income potential than if it had 30,000sq ft.
Impact on Rental Income
There’s a direct relationship between rental income and GLA. Most landlords price per square foot, so the bigger the GLA, the higher the top-line revenues. For example:
- So, if a property charges $20 per square foot per year, then its GLA of 10,000 square feet would bring in $200,000 in rent every year.
There are leasing decisions to make and issues of marketability.
Properties with larger amounts of GLA are desirable, as tenants are looking for places to meet their needs. Businesses that require large floor space, such as supermarkets department stores or gyms find large GLAs particularly attractive.
Case Study: GLA Effect on Revenue
Let us take an example of a shopping mall, with Total GLA of 100,000 sq. ft. If 90% of this space is leased at an average rate of $30 per square foot, the building would provide $2.7 million in annual rental income. Now, let’s assume a slight reduction in the GLA from the property. This deduction could translate into a decrease in $300,000 in annual revenue, a substantial impact for those managing or owning property.
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An Introduction to GLA in Residential Properties
GLA vs. Gross Living Area
Gross Living Area When it comes to residential real estate, GLA becomes Gross Living Area. The concept is similar, but instead of leasable commercial, it is now livable residential.
Gross Living Area (GLA) is finished, habitable spaces, including:
- Bedrooms
- Kitchens
- Living rooms
Basements or garages are generally considered unfinished and would not count unless fully finished when calculating a home’s square footage.
Commercial vs Residential GLA: A Comparison
| Aspect | Commercial GLA | Residential GLA |
| Definition | Total leasable space | Finished, livable area |
| Included Areas | Retail stores, offices | Bedrooms, kitchens, living rooms |
| Excluded Areas | Shared lobbies, restrooms | Garages, unfinished basements |
| Purpose | Revenue generation | Livability and home valuation |
This knowledge is imperative, especially when transitioning from commercial to residential investments or vice versa.
How is GLA Calculated?
BOMA Standards On GLA Measurement
In commercial properties, GLA is standardized using BOMA (Building Owners and Managers Association) guidelines. GLA is defined, according to BOMA, between the outer surface of exterior walls and the center line of shared walls between tenants.
Steps in Calculating GLA
- Inspect the building for its entire floor area.
- Remove areas that are not leasable, including:
- Hallways
- Elevator shafts
- Common restrooms
- Areas leased by tenants, such as:
- Retail spaces
- Office units
Example of Calculation for GLA
Let us take a building with an area of 50,000sq ft. If that 10,000 square feet contains stuff like hallways, stairwells, and maintenance rooms, the remaining 40,000 square feet is referred to as the GLA.
How GLA Affects Property Value
GLA Stands for Greater Value
Larger GLA properties are typically valued higher since they produce higher revenue. Maximizing the GLA and minimizing non-leasable spaces are vital to landlords.
Statistical Data Supporting the Impact of GLA
According to industry data:
- In the same market, properties with a GLA exceeding 50,000 square feet garner valuations well north of 20-30% above those of their top competitors with smaller GLA.
- This stable cash flow and strong tenant retention is found among retail centres that have over 90% of GLA leased.
Attracting Buyers and Tenants
Properties with a big GLA are often very attractive to buyers and tenants. For example:
- Retailers need more room to showcase their products.
- Office tenants need the physical publishing space to house their workforce.
Conclusion
To sum up, in commercial property management, GLA (Gross Leasable Area) is of utmost importance in real estate. It informs everything from property appraisal to rent income to tenant happiness. The abbreviation GLA, or Gross Leasable Area, is a crucial term to know when entering the industry, whether you’re a property owner, investor, or tenant.
Refining this metric will continue to inform property trends as the real estate market moves forward. So, whether you’re renting a venue or purchasing a property, remember GLA—it’s not just a square footage; it’s the key to staying in the black.
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