Real Estate
Calculating Land to Building Ratio
December 2, 2019
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Land to Building Ratio is a technical term used in urban planning that determines the total build-up space of a building on a plot of land. The land to the building ratio is fixed by the government based on various parameters like population, infrastructure, etc. This ratio must be low to utilize the whole property. Now, let’s learn how to calculate the land to building ratio. 

How to Calculate Land to Building Ratio

Land to building ratio of a building is the total area of the building divided by the total area of the plot or land on which it is built. The formula for the land to building ratio is:

Total Covered Area of All Floors/ Area of the Plot

With an example, we can understand it clearly. So, let’s consider you have a structure or building in which the total covered area is 20,000 square feet, and the area of the plot is 10,000 square feet. Now, we will divide 20,000 by 10,000, and the ratio will be 2:1. Generally, this ratio is fixed by the government. The average Land to Building Ratio ranges between 2.5:1- 3.5:1 depending on the area. 

Importance of Land to Building Ratio

The land to building ratio is vital in industrial and commercial properties. To build a structure in commercial areas, you need to follow the rules of parking space under building code strictly. But this ratio is not often maintained in residential buildings. For example, if an industrial or commercial structure has 10:1 land to building ratio, it is under-utilized. However, if the ratio is 2.3:1, the structure is in maximum utilization. Also, it can violate the buildings code according to the state. So, it may not be essential for residential houses but vital for industries and commercial spaces to utilize the maximum amount of land by maintaining the building code. 

Land to Building Ratio in the Mall

We don’t see shopping malls in the middle of nowhere or in a desert. To set up a commercial retail space, firstly, you need to consider the total population of the area you are going to build the retail store. If you don’t have enough customers in the shopping mall, sooner or later, the shopping mall will shut down. It is essential to have an accessible transportation system in suburban areas. Also, it is necessary to build an underground parking facility to create space for car parking. 

In every shopping mall, there is a big player who attracts the most customers, known as the anchor tenant. Other stores offer less important products compared to the big store. 

Excess Land Value

Excess land is a common issue for industries. Excess land is the amount of area left after parking space and storage space. We can determine the excess land by using the land to building ratio. In most of the cases, the land to building ratio is between 2.5:1- 3.5:1. The excess land value needs to be added to the income approach of an industry. The value of the excess land is dependent on whether the excess area can be sold separately or not.

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Richard Nevis

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