Some of the most frequently asked questions we at AQUILA get when working with tenants are “what are CAM expenses,” “what does CAM stand for,” and “what is included in these charges?”

In this article, we will answer those three questions, plus the differences in CAM expenses across industrial, retail and office properties.

 

 

What are Common Area Maintenance (CAM) expenses?

Common area maintenance is one of the three main components that make up operating expenses, the other two being insurance and property taxes. This, in turn, makes CAM part of what is called a Triple Net (NNN) Lease.

For More Information on Triple Net Leases, Read Our Guide to the Elements of a Commercial Lease (Terms, Definitions)

Common Area Maintenance (CAM) expenses are fees paid by tenants to landlords to help cover costs associated with overhead and operating expenses for common areas. Common areas are spaces used for or benefitted by all tenants and  include, but are not limited to, hallways, elevators, parking lots, lobbies, public bathrooms and building security.

CAM expenses are usually defined in the lease to clear up any ambiguity as to what they entail. It is important to have a clear understanding of these expenses before signing a new lease.

 

How are your CAM expenses calculated?

At the beginning of each year, your property manager forecasts anticipated common area maintenance expenses for the property as a whole as a part of the annual budget.

Then, that CAM estimate is divided proportionally across the tenants in the building. Your percentage of the expense is calculated by dividing your square footage by the gross leasable area of the building.

How to calculate CAM

This total expense is calculated into your monthly operating expense, so that it can be paid in small increments throughout the year.

At the end of the year, the property manager will reconcile actual CAM expenses with the estimated cost. If the actual CAM expenses are less than the estimated, the property managers will issue you and the other tenants a credit for the difference. If the estimated CAM did not cover the actual costs for the year; however, you will owe this difference as a lump sum.

This is where having a good property manager is crucial. Proactive property managers should be able to see these overages coming mid year and will reforcast the estimated CAM expenses for the year. This will result in an increase to your operating expenses, but will save you the pain of writing an unforeseen, large check for the lump sum at year end.

 

What is included in CAM expenses?

The items included in CAM expenses differ depending whether the lease is in an office, retail, or industrial property. While each lease is different, we have created a chart outlining general guidelines  for CAM expenses for each type of lease.

Some examples of items that are included in CAM expenses are as follows:

Chart: What is included in CAM (Common Area Maintenance) Fees for Office vs. Industrial vs. Retail

To download this chart as a PDF for easy reference, enter your email address below and click “submit”.


 

Lobby Space at The Terrace in Austin, Texas | Common Area Maintenance for Office

Similar to retail and office, landscaping is included in the common area expenses for industrial properties.

Is electrical included?

In office buildings, electricity is typically metered across the building as a whole, rather than submetered as it is in retail and industrial. Landlords expect office tenants to work a standard forty-hour work week, and use essentially the same amount of electricity per square foot from tenant to tenant.  For this reason, the electrical expense is included in the common area maintenance and divided across all tenants based on their size in the building.

Is janitorial included?

Janitorial costs are commonly factored into CAM expenses in office properties because of the numerous common areas requiring attention such as lobbies, hallways, elevators and restrooms.

What else is included?

Landscaping, parking lots and administrative fees are also included because these are all shared spaces and services and are used by all tenants.

Parking lots and lights are a part of Retail CAM | South Towne Center in Austin, Texas

Parking lot maintenance and lighting expenses are included in the common area maintenance expenses for retail centers.

What’s included in Retail CAM expenses?

Is electrical included?

CAM expenses for retail tenants are very similar to those for office tenants. However, because of the variety of uses in retail centers, there can be a wide variation between electrical use. For example, a restaurant is going to use far more electricity than a neighboring boutique. Therefore, retail centers are submetered and electrical is paid separately by the tenant, rather than as a part of CAM. The only exception to this is property and parking lot lighting.

Is janitorial included?

Additionally, there is less common space in a retail center – no lobbies, public restroom, etc. – so janitorial costs are normally excluded from from CAM.

What is included?

Sidewalks, driveways, loading docks and delivery areas maintenance fees make up a large portion of retail CAM expenses.

Landscaping is a part of CAM for Industrial Buildings | Tech Center Southwest in Austin, TX

Similar to retail and office, landscaping is included in the common area expenses for industrial properties.

What’s included in Industrial CAM expenses?

Is electrical included?

Similar to retail, industrial properties are submetered because tenants tend to use vastly different amounts of electricity depending on what they do. For example, a manufacturer and a storage warehouse serve entirely different purposes. One will run machines all day long requiring high electrical costs, while one may only require electricity for a couple of hours. For this reason, industrial tenants are required to contract and cover their own electrical expenses, making this an individual operational expense and not a CAM expense.

Is janitorial included?

Because there are not shared commons spaces, such as lobbies and restrooms, janitorial also individually contracted by tenants and is not included in Common Area Maintenance expenses.

What is included?

Typically industrial CAM expenses include property and parking lot lighting, landscaping, parking lot maintenance and water for irrigation. This is because all tenants in the building share the benefits of these.

 

Why is it important to know about CAM expenses?

As we mentioned before, CAM expenses are an estimate and are often reconciled at year end. The property manager will provide you with a statement of the actual CAM and Operating Costs for the previous year. This statement will state the amount in which you have underpaid or overpaid, and you will either receive credit back or owe the balance.

It is important to know what is included in CAM expenses in order to fully understand what it is that you are paying for in your monthly operating expenses.

Often times, CAM expenses include many indirect costs that are not easily identifiable, so it is important to ask your landlord the exact expenses included in your lease.

AQUILA PRO TIP

Be sure to price out the best cable type for you

In this article, we explain data drops based on standard CAT5E cabling, which required you to run a cable for each device. In recent years, CAT6 cabling has come on the market; CAT6 cables allow you to run multiple devices on a single cable, decreasing your total required drop count.

While CAT6 cables are more expensive per cable than CAT5E, you can use less cables with CAT6, so it is typically still more cost effective to install less CAT6 cables at the higher price per unit.

To continue learning about commercial leases terms and structures, check out these articles:

Or if you’d like to learn more about the cost to lease space in Austin, Texas, read our cost to lease office space or cost to lease industrial space articles.

If you have a question about your current lease terms, or would like to talk to a broker about negotiating your upcoming lease, contact us to schedule a consultation.

 

Request a Consultation - AQUILA Tenant Rep
 


Subscribe to Our Newsletter


Graham Moore | Property Manager | AQUILA Commercial

Graham Moore

Tenants and owners alike are huge Graham fans. No one can deny: tenant relations and customer service are his forte. Graham works to ensure property owners reach their goals and provides outstanding tenant relations in the process.

Recent posts from Graham


Sign Up for News

Stay on top of what’s happening in the Austin real estate market. You can also manage your subscription preferences.