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Real Estate Treadmill on CAM Costs

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I noticed a new blog today, Real Estate Treadmill, a blog run by a real estate pro looking at commercial real estate trends in Central Massachusetts.

Today, the blog has an entry on common area costs.

Here's an excerpt. It's an explanation of how these charges work, which most pros would already now. But it's a good illustration for those that don't work as regularly with properties with these kinds of issues.

Below are 2 terms you want to understand that relate to the Common Area of a building.

CAM Charges - CAM stands for Common Area Maintenance. These charges include expenses such as snow removal, landscaping, and general building maintenance as it applies to the Common Areas of the building. These expenses are usually divided among all tenants in the building based on each tenant's square footage. If each tenant has 1,000 SF of a 10,000 SF building, each tenant would be responsible for paying 10% of the Common Area charges. You want to make sure that the lease rate that a landlord quotes either specifically includes or excludes these charges.

You may see a rate quoted as $15/SF but further down in the body of the lease there could be a reference to CAM charges that equal another $3/SF. This additional charge just bumped your rent up 20%. These types of charges are common in industrial properties and some newer retail properties but not as common in office properties. You would typically have these charges built into an office lease.

Common Area Factor - Often times a lease will reference leaseable area of a space not the usable area. Let's take a 100,000 SF office building as an example. Of the 100,000 SF, there is a huge lobby on the first floor and small lobbies on each of the 4 upper levels. This lobby area totals 10,000 SF or 10% of the total building's square footage. Technically the building only has 90,000 SF of "usable area" available to the tenant but the landlord wants to make sure he is making money on all 100,000 SF. After all, somebody has to pay for the cleaning and upkeep of the common areas and the landlord doesn't want to do it.

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Elaine Misonzhnik

Senior associate editor Elaine Misonzhnik has been writing for National Real Estate Investor since June 2006 and has covered commercial real estate for more than 12 years. She first became...
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