The Floor Area Ratio (FAR) is a commonly used real estate metric. It is the ratio of a building’s available square footage to the total area of the lot on which the building sits. Sometimes referred to as the Floor Space Index (FSI), the FAR helps developers and commercial real estate owners determine if a property is economically viable. Cities and towns often use this ratio in their zoning laws as well. In many cases, this measurement is used to control congestion or help enforce other municipal ordinances.
Calculation of a building’s floor area ratio is a straight forward exercise. Take the total floor space in a structure and divide it by the square footage of the building’s lot. For example, a 1,000-square-foot (about 93-square-meter) building sitting on a 2,000-square-foot (about 186-square-meter) lot would have an area ratio of about 0.5. Similarly, a five story building with each floor being 200 square feet (about 19 square meters) would have 1,000 square feet (about 93 square meters) of floor space. If this building sits on a 2,000-square-foot (about 186-square-meter) lot, the area ratio would also be 0.5.
Frequently, the floor area ratio is used in zoning laws. Setting an area ratio for a lot fixes a building’s total square footage, regardless of the building’s design. Total square footage gives a city or town an indication of the municipal services that will be required. For instance, a city or town that knows the total square footage of an office building can estimate how much water will be required to support the building occupants.
Some cities or towns use this ratio to enforce quality of life initiatives as well. For example, a new building in a congested city area might be zoned with a low area ratio. To achieve this, the designer would have to leave a great amount of open space on the lot. Similarly, a low area ratio for a building in the country would ensure there is adequate parking. This would help ensure the neighbors are not bothered by cars parked on their street.
Developers often use the floor area ratio to determine the revenue-generating capacity of a vacant lot. A higher area ratio means there will be more floor space available to sell or rent to tenants. In this way, the area ratio can help establish whether a new building project is economically viable.
Additionally, developers factor the FAR into their design plans. For example, suppose a 1,000-square-foot (about 93-square-meter) plot of land is zoned with an area ratio of 0.5. The developer has several choices. He can build a 500-square-foot (about 46-square-meter), single-story structure. An alternative would be a two-story building with each floor having 250 square feet (about 23 square meters). He might also propose a four-story building with each floor having 125 square feet (about 12 square meters). All of these buildings would have an area ratio of 0.5. This gives a developer great flexibility in designing a building. He can add floors to his design by shrinking the square footage of the floors.