Gross Building Area

Definition of Gross Building Area (GBA)

Gross Building Area (GBA) is defined as the total finished square footage of all levels of a building, measured from the exterior faces of the outside walls. In the context of commercial mortgages, GBA represents the entire physical footprint of the structure, including both income-producing and non-income-producing spaces.

Detailed Description and Measurement

Unlike other metrics that only focus on space available for tenants, GBA is an "all-encompassing" measurement. It does not deduct for "holes" in the floor, such as stairs or elevators, nor does it exclude structural elements. To arrive at the GBA, an appraiser or surveyor measures the building's perimeter at each floor level. The following areas are typically included:

• Vertical Penetrations: This includes elevator shafts, stairwells, and mechanical flues across all floors.
• Core and Common Areas: Lobbies, public restrooms, hallways, and shared building corridors.
• Mechanical and Storage Rooms: Areas housing HVAC systems, electrical panels, and general maintenance storage.
• Enclosed Exterior Spaces: Fully enclosed porches or penthouses, provided they are part of the building's permanent structure.

The Role of GBA in Commercial Mortgages

Lenders and underwriters utilize GBA as a foundational data point for several critical components of the loan underwriting process:

1. The Cost Approach to Valuation: In a commercial appraisal, the "Cost Approach" estimates what it would cost to replace the building in the event of a total loss. Because construction costs are generally quoted per square foot of total structure, the GBA is the primary figure used to determine the total replacement cost.

2. Determination of Building Efficiency: Lenders compare the GBA to the Net Rentable Area (NRA) to calculate an Efficiency Ratio. For example, if a building has a GBA of 100,000 square feet but only 85,000 square feet of rentable space, it has an 85% efficiency ratio. Lenders prefer higher efficiency because it indicates a greater percentage of the building is generating revenue to service the mortgage debt.

3. Insurance and Collateral Risk: Mortgage documents require that the borrower maintains insurance coverage sufficient to rebuild the entire structure. The GBA ensures the lender is not under-insured. It also provides a standardized metric to compare the subject property against other "comps" in the market during the collateral assessment.

4. Operating Expense Benchmarking: Many building expenses, such as exterior maintenance, roof repairs, and cleaning services, are calculated based on the total physical size of the building (GBA) rather than just the leased portions. Lenders use this to verify if the borrower's projected operating budget is realistic.