Definition
The Floor Area Ratio (FAR) in finance, typically used in real estate, refers to the ratio of a building’s total floor area to the size of the plot upon which it is built. It is a measure that helps in assessing the density of a property. Higher FAR values typically indicate more densely populated areas or structures.
Key Takeaways
- Floor Area Ratio (FAR) is a crucial metric in urban planning and real estate development, used to measure the gross floor area of a building in relation to the size of the land it is built on.
- A higher FAR indicates a denser and potentially higher building, allowing for more usable area. Conversely, a lower FAR signifies a less densely constructed area with possibly smaller or fewer buildings.
- FAR is a vital tool in implementing zoning regulations, managing urban growth, and controlling the overall built-up area within certain territorial boundaries.
Importance
The Floor Area Ratio (FAR), is essential in the finance and real estate sectors because it describes the total allowed usable floor space in relation to the total area of the plot.
It is a critical zoning and planning tool used by city councils and planning departments to control and regulate the size, bulk, and density of buildings.
Through FAR, officials can ensure appropriate land use and that buildings blend seamlessly with existing environments.
Additionally, for individuals or businesses interested in real estate development, knowledge of FAR restrictions is vital in evaluating the development potential and value of a property parcel.
Explanation
The Floor Area Ratio (FAR) is an essential tool often used by urban planners and developers to regulate and control the density and mass of buildings in a given area. The main purpose of the FAR is to manage the total amount of space or volume that a building can occupy in relation to the size of the lot on which it is established.
This way, it helps to ensure that there is a balance between the size of buildings and the available space, preventing overcrowding and ensuring adequate light and air circulation. Furthermore, the Floor Area Ratio is used as a development control tool by municipal authorities to prevent over-utilization of resources and infrastructure in a particular area and to maintain the character and aesthetic of the neighborhood.
By dictating the maximum FAR limits for different types of buildings, the appropriate level of development can be maintained, facilitating the organized growth of cities and towns. It is, therefore, central not only to urban planning and zoning regulations but also to the strategic implementation of real estate projects.
Examples of Floor Area Ratio
The Floor Area Ratio, or FAR, is a planning tool used by city and regional planners to calculate the intensity of land use in a specified area. The FAR indicates the total square meters of a building divided by the total square meters of the plot. It regulates the amount of building on a lot and hence the population density. Here are three real-world examples:
City Zoning Regulations: Many cities, like New York City, have zoning regulations that use FAR to limit the amount of construction in given areas. For example, if a lot in NYC has a FAR of 10, this means the total amount of floor area on the lot can be up to 10 times the size of the lot itself.
Commercial Buildings: Existing buildings often provide an example of FAR. A commercial building on a 1,000 square meter lot may have a floor area of 2,000 square meters. This would indicate a FAR of
0, meaning the building’s floor area is twice the lot area.
Mixed-Use Developments: In a mixed-use development, like the Hudson Yards project in Manhattan, the FAR can be used to define how much of the space is dedicated to residential units versus commercial or retail space. This allows a balance between population density and commercial activity, both of which can drive economic growth.In all these cases, FAR is used as a measure to prevent overcrowding, maintain a balanced city layout, and enhance the living environment of an area.
Frequently Asked Questions about Floor Area Ratio
1. What is Floor Area Ratio?
Floor Area Ratio (FAR) is a zoning term used in urban planning and real estate to describe the total square feet of a building divided by the total square feet of the lot where the building is located.
2. How is Floor Area Ratio used in planning?
The FAR is used as an indicator of the total amount of space a building takes up. It helps urban planners limit the size of buildings and maintain a consistent scale and character in a neighborhood.
3. Why is Floor Area Ratio important?
The FAR is significant as it regulates building density and stipulates how much area of a lot can be used for constructing a building. It objectively reflects the intensity of the site’s use and helps protect open spaces and prevent overcrowding.
4. Can Floor Area Ratio vary?
Yes, the FAR can vary based on the zoning laws of a specific area. Different areas often have different maximum FAR figures, based on their specific requirements and land availability.
5. How to calculate Floor Area Ratio?
The Floor Area Ratio is calculated by dividing the total floor area of the building by the total plot area. It’s a mathematical tool used to control the size of a building and manage urban development.
Related Entrepreneurship Terms
- Building Coverage Ratio
- Zoning Regulations
- Gross Floor Area
- Site Area
- Land Use Planning
Sources for More Information
- Investopedia: A comprehensive website dedicated to a wide range of financial and investing education-material, including thorough explanations of finance terms like Floor Area Ratio.
- American Planning Association: This organization provides resources relating to urban, suburban, regional, and rural planning, including terminologies like Floor Area Ratio.
- Urban Land Institute: A research and education organization focusing on land use and real estate development discipline, including financial aspects like Floor Area Ratio.
- ArchDaily: This online platform publishes architectural projects, news, and products from around the world, often discussing building regulations and terminologies like Floor Area Ratio.
