What Is Cam In Commercial Real Estate: Essential Knowledge

In commercial real estate, CAM fees, or Common Area Maintenance fees, are part of the operating expenses that tenants pay. These rates include triple net leases, in which the tenant pays the base rent and a portion of the operating expenses, such as CAM expenses. CAM expenses allowance fees are calculated based on the tenant’s proportionate share of the leasable square footage of the property. Landlords often include CAM charges in leases for office buildings and other types of commercial property to cover maintenance of common areas like parking lots, lobbies, and landscaping.

What does CAM stand for in real estate?

CAM stands for Common Area Maintenance in real estate. It refers to the costs associated with maintaining and operating common areas within a commercial property that multiple tenants share. These costs can include expenses like landscaping, cleaning, repairs, utilities for shared spaces, property taxes, and insurance. CAM charges are typically included in commercial lease agreements and are passed on to tenants as part of their share of maintaining the common areas of the property.

CAM as a commercial term?

In commercial real estate, CAM (Common Area Maintenance) is a term that refers to the expenses associated with maintaining and operating common areas within a commercial property. Multiple tenants share these common areas and can include spaces like lobbies, hallways, elevators, parking lots, and outdoor landscaping. CAM charges cover various costs such as cleaning, landscaping, repairs, utilities for shared spaces, property taxes, insurance, and management fees related to these common areas.

CAM charges are usually included in a commercial lease. They are passed on to tenants based on their proportionate share of the total leasable space in the property. The details of how CAM expenses are calculated and allocated may vary depending on the terms of the lease. These terms are negotiated between the landlord and tenant.

These expenses are an important consideration for tenants. Especially when evaluating the total cost of occupying commercial space, they can significantly affect the overall cost of the lease.

Common expenses included in CAM fees cover a range of maintenance and operating costs associated with shared commercial real estate spaces. These expenses typically cover services such as cleaning, repairs, landscaping, snow removal, security, utilities for common areas, property taxes, insurance, and management fees. Landlords and owners should accurately calculate CAM. In this way, they can ensure an equitable distribution among tenants and cover the costs necessary to maintain the common areas of the property.

How do you calculate CAM?

Calculating CAM (Common Area Maintenance) charges involves several steps and considerations. Here’s a general overview of how CAM charges are typically calculated in commercial real estate:

Identify common area expenses

Start by listing all the expenses associated with maintaining and operating the common areas of the commercial property. This can include costs such as landscaping, cleaning, repairs, utilities for shared spaces, property taxes, insurance, security, and management fees related to common areas.

Determine total CAM expenses

Add up all the common area expenses to calculate the total CAM expenses for the property over a specific period, such as a year.

Calculate the tenant’s proportionate share

Determine each tenant’s proportionate share of the total CAM expenses. This is usually based on the tenant’s leased square footage compared to the total leasable square footage of the property. For example, if a tenant leases 1,000 square feet in a building with a total leasable area of 10,000 square feet, their proportionate share would be 10% (1,000 sq ft / 10,000 sq ft).

CAM rate calculation

Divide the tenant’s proportionate share by the total leasable square footage to calculate their CAM rate. This rate represents the percentage of CAM expenses that the tenant is responsible for.

CAM charge calculation

Multiply the tenant’s CAM rate by the total CAM expenses to determine the tenant’s CAM charges for the specific period (e.g., monthly, quarterly, or annually).

What is CAM in a commercial lease?

CAM (Common Area Maintenance) in a commercial lease refers to the provision that outlines how the costs of maintaining and operating common areas within a commercial property will be shared between the landlord and tenants. Common areas include spaces like lobbies, hallways, elevators, parking lots, landscaping, and other shared facilities or amenities.

The type of lease, whether it’s a gross lease or a triple net lease, determines how CAM fees are handled. In a gross lease, the landlord may want to include CAM expenses in the base rent. This simplifies the payment structure for tenants. However, in a triple net lease, CAM expenses are billed separately and the tenant pays its share of the CAM expenses directly to the landlord or property manager. These expenses may vary depending on factors such as the size and square footage of the property. Also, the level of maintenance required for the common areas changes.

For tenants, understanding CAM fees and how they are calculated is crucial for budgeting and evaluating lease agreements. It is essential to carefully review the CAM clause in the lease. Also, clarify any questions about what is included in the CAM charges. Similarly, landlords should communicate transparently with tenants regarding CAM expenses. In addition, they should provide detailed breakdowns of costs and address any disputes or discrepancies promptly. Finally, maintain positive relationships and ensure contract compliance.

Bottom line

Finally, CAM charges are an integral aspect of commercial real estate leases, impacting landlords and tenants. Understanding how CAM charges are calculated, what they cover, and how CAM clauses are structured in leases is crucial. This makes for informed decision-making and avoids potential disputes. By handling CAM clauses effectively, both parties can ensure a fair and transparent agreement. That will ultimately benefit everyone involved in the commercial leasing process.

Written by Vanessa Gallanti. June 2, 2024

Enthusiast about planning, project management, construction materials and technology, and construction. A civil engineer from Los Andes University and a content writer for Kukun.