Floor Area Ratio (FAR) is the relationship between the total amount of usable floor area of a building, and the total lot area on which a building stands.
The FAR ratio can be calculated simply by dividing the gross floor area with the area of the plot. Evaluating this ratio is critical for developers and investors, because it determines the density of development in which local municipalities permit.
For office and industrial commercial spaces, FAR is suggested to be between 1.0 and 1.25. However, these parameters vary from state to state, town to town, and more importantly zone to zone.
Oftentimes the ratio is dependent upon the nature of the land and/or development. This is because the organic growth pattern, population dynamics, and construction activities vary. One reason for a municipality’s urge for a stricter FAR is to protect and define the heritage zones; protected monuments or other structures that may be impacted by increased FAR. Other reasons for changes or updates to certain zoning rules are to encourage growth and accommodate a combination of mixed-use, affordable housing, and sometimes more industrial/commercial expansion in certain market segments.
One can assume that if the FAR is increased, that area probably has a higher building density with lower project and construction costs, allowing brokers to sell more space. However, this reduction in the per capita cost on development infrastructure is not a direct proportion relation.
The matter of whether developers and building owners should maximize their facility space
horizontally or vertically hinges on limited available supply, and whether horizontal growth is
truly a solution in context with growing populations and increasing land prices.
While a FAR of 1.0-2.0 is considered ideal for creating transportation choices, most towns allow less FAR than this in their town centers. According to the American Public Transportation Association (APTA), for every 20% increase in floor space of commercial centers, there is a 4.5% increase in ride sharing and transit use. Therefore, maintaining equilibrium between sustained, planned growth, and development is not only crucial, but necessary for the future of our communities.
Geoffrey Smith, Vice President of Marketing at the New York Grant Company, a private consulting firm specializing in securing financial incentives.