Floor Area Ratio: Definition, Formula, and Example

What Is the Floor Area Ratio?

The floor area ratio is the relationship between the total amount of usable floor area that a building has or has been permitted to have and the total area of the lot on which the building stands. A higher ratio would likely indicate a dense or urban construction. Local governments use the floor area ratio for zoning codes.

How to Calculate the Floor Area Ratio

You can determine the ratio by dividing the total or gross floor area of the building by the gross area of the lot.

$\begin{aligned} &\text{Floor Area Ratio} = \frac{ \text{Total Building Floor Area} }{ \text{Gross Lot Area} } \\ \end{aligned}$​Floor Area Ratio=Gross Lot AreaTotal Building Floor Area​​

What Does the Floor Area Ratio Tell You?

The floor area ratio accounts for the entire floor area of a building, not simply the building's footprint. Unoccupied areas such as basements, parking garages, stairs, and elevator shafts are excluded from the square footage calculation.

Buildings with a different number of stories can have the same floor-area-ratio value. Every city has a limited capacity or limited space that can be utilized safely. Any use beyond this point puts undue stress on a city. This is sometimes known as the safe load factor.

The floor area ratio is variable because population dynamics, growth patterns, and construction activities vary and because the nature of the land or space where a building is placed can vary. Industrial, residential, commercial, agricultural, and nonagricultural spaces have differing safe load factors so they typically have differing floor area ratios as well.

The floor area ratio is a key determining factor for development in any country. A low floor area ratio is generally a deterrent to construction. Many industries and specifically the real estate industry seek hikes in the floor area ratio to open up space and land resources to developers.

An increased floor area ratio allows a developer to complete more building projects and this inevitably leads to greater sales, decreased expenditures per project, and greater supply to meet demand.

Examples of the Floor Area Ratio

The floor area ratio of a 1,000-square-foot building with one story situated on a 4,000-square-foot lot would be 0.25x. A two-story building on the same lot where each floor was 500 square feet would have the same floor-area-ratio value.

A lot has a floor area ratio of 2.0x and the square footage is 1,000. A developer could construct a building that covers as much as 2,000 square feet in this scenario. It could include a 1,000-square-foot building with two stories. 

Consider an apartment building for sale in Charlotte, North Carolina. The asking price for the apartment complex is $3 million and it spans 17,350 square feet. The entire lot is 1.81 acres or 78,843 square feet. The floor area ratio is 0.22x, or 17,350 divided by 78,843.

The Bottom Line

The impact that the floor area ratio has on land value cuts both ways. An increased floor area ratio may make a property more valuable if an apartment complex can be built that allows for more spacious rentals or more tenants. But a developer who can build a larger apartment complex on one piece of land may decrease the value of an adjoining property with a high sale value bolstered by a view that has become obstructed.