If you’re reviewing a commercial lease, you’ve likely seen the term CAM, or Common Area Maintenance. CAM charges can have a significant impact on a tenant’s total occupancy cost, so it’s important to understand what they include and how they are calculated.
What Does CAM Typically Cover?
CAM generally refers to the shared expenses required to operate and maintain the common areas of a commercial property.
Depending on the property and the terms of the lease, CAM expenses may include:
- Landscaping and exterior maintenance
- Parking lot upkeep and lighting
- Security and janitorial services for common areas
- Property management fees
- Repairs to shared building systems
The specific expenses included in CAM can vary by property and lease, so tenants should review the lease carefully to understand which costs may be passed through to them.
How Is CAM Calculated?
In many commercial leases, tenants pay their pro rata share of applicable CAM expenses based on the percentage of the property they occupy.
For example, if a tenant occupies 10% of the leasable space in a building and the property’s applicable CAM expenses total $100,000 for the year, the tenant’s share would be approximately $10,000, subject to the specific terms of the lease.
However, the actual calculation can be more complicated depending on the property, lease structure, expense exclusions, caps, administrative fees, and other provisions.
CAM is also an important component of many NNN leases, in which tenants typically pay certain property operating expenses in addition to base rent.
Why Does CAM Matter?
Not all CAM charges are created equal.
Small differences in what is included in CAM, how expenses are allocated, and how those expenses are managed can have a meaningful financial impact over the life of a lease.
That’s why tenants should consider CAM alongside base rent and other occupancy costs when evaluating a commercial lease.
Understanding CAM before signing a lease can help tenants better estimate their total occupancy costs and avoid unexpected expenses.
Ask a Broker
If you’re reviewing a commercial lease or evaluating a commercial property, Meghan Reed can help you better understand the factors that can affect your occupancy costs.
Contact Meghan to learn more about commercial real estate leasing and available opportunities.
