A.CRE

Floor Area Ratio

A ratio expressing the relationship between the buildable area (currently built or permitted) and the land on which the property is located. A higher FAR ratio indicates a higher density (i.e. the more area legally permissible to be built on the land).

For example, if a plot of land is 10,000 SF and there is a FAR of 6. The allowable buildable square footage is 60,000 (10,000 x 6).

Calculating Floor Area Ratio (FAR) involves these steps:

  • STEP 1: Find the Buildable Land Area (B), which is the portion of the development site suitable for construction, excluding constraints like public streets and wetlands. Buildable Land Area (B) = (Parcel Width x Parcel Depth) – Area of undevelopable land (if applicable).
  • STEP 2: Determine the Floor Area of each story of the building. Measure the area of each story between the exterior walls, including portions above the ground level before grading.
  • STEP 3: Calculate the Gross Floor Area (G) by summing up the area of each story. Gross Floor Area (G) = Area of 1st Story + Area of 2nd Story… (consider all floors above the ground).
  • STEP 4: Compute the Floor Area Ratio (FAR) by dividing the Gross Floor Area (G) by the Buildable Land Area (B). Floor Area Ratio (FAR) = (G) / (B).

Putting ‘Floor Area Ratio’ in Context

Scenario:

Coastal Office Ventures, a real estate investment firm specializing in value-add opportunities, is redeveloping a former industrial warehouse into a cutting-edge creative office space in Santa Monica, California. The project, named OceanView Creative Workspace, is strategically located near the beach, in a burgeoning tech and media district, making it an attractive investment for office tenants looking for open, collaborative environments.

Property Details:

  • Parcel Size (Buildable Land Area – B): 20,000 SF
  • Permitted FAR for the zoning district: 2.5
  • Planned Gross Floor Area (G): Coastal Office Ventures intends to maximize the allowable square footage for office use by constructing a 4-story building with a total of 50,000 SF of gross floor area.

Calculating the FAR

Step 1 – Buildable Land Area (B):

The total parcel size is 20,000 square feet. There are no undevelopable portions of land such as public streets or wetlands, so the Buildable Land Area (B) is simply 20,000 SF.

Step 2 – Floor Area of Each Story:

The firm plans to build a four-story structure. Each floor will have an area of 12,500 SF, with no significant architectural overhangs or void spaces.

Step 3 – Gross Floor Area (G):

The total Gross Floor Area (G) is calculated as:

G = Area of 1st Story + Area of 2nd Story + Area of 3rd Story + Area of 4th Story= 12,500 SF + 12,500 SF + 12,500 SF + 12,500 SF = 50,000 SF

Step 4 – Floor Area Ratio (FAR):

To calculate the Floor Area Ratio (FAR), we divide the Gross Floor Area (G) by the Buildable Land Area (B):

FAR = G / B = 50,000 SF / 20,000 SF = 2.5

Putting the FAR in Context

The local zoning code for this area in Santa Monica allows a maximum FAR of 2.5, meaning developers can build up to 2.5 times the land’s area in square footage. In this case, OceanView Creative Workspace will fully utilize the allowable FAR by developing 50,000 SF on the 20,000 SF lot.

This high FAR reflects the density permitted for this urban location, aligning with the city’s vision to encourage the development of creative office spaces for technology, media, and entertainment companies. Coastal Office Ventures has maximized the site’s potential by taking full advantage of the allowable FAR, making the project more financially viable while meeting the demand for high-quality office space in the area.

This calculation underscores how understanding and applying FAR is crucial in optimizing land use in high-demand markets. By effectively leveraging the 2.5 FAR, Coastal Office Ventures ensures the project maximizes rentable space, boosting potential income and property value.

Related Content:
Click here to get this CRE Glossary in an eBook (PDF) format.
by