The "Add-on factor" is a term used in commercial real estate, particularly in office buildings. This factor refers to the ratio of the total gross floor area of the building to the total net leasable area that tenants can exclusively use.
The add-on factor is used to allocate the costs of common areas (such as the entrance lobby, hallways, shared restrooms, etc.) among tenants. The calculation is done by subtracting the net leasable area from the total gross floor area of the building and then dividing the result by the net leasable area. The result is a coefficient by which the area of each office unit in the building is multiplied. Thus, in effect, the landlord leases out 100% of the building's area.
For example, if a building has a total gross area of 10,000 m² and a total usable area of 8,000 m², the add-on factor would be 25% ((10,000 - 8,000) / 8,000).
The tenant then pays rent not only based on the area they exclusively use (net leasable area, NLA) but also based on their share of the common areas, which is calculated using the add-on factor.
