What is CAM?
If you are in the market for Commercial Real Estate and you end up leasing some space in a multi-tenant business park, you will most likely see a monthly fee that is represented by the acronym CAM. This “CAM” stands for “Common Area Maintenance.” When you lease property in a multi-tenant business park, you do not lease the entire property. You lease a portion of the property with other tenants on the same property. In these instances, each tenant is responsible to maintain the interior of their respective units.
How Do CAMs Work?
So, who maintains the exterior of the property if there are multiple tenants? This exterior area that is not included in any one specific lease is maintained by the landlord. Most landlords then pass through this expense to their tenants through a CAM fee. This CAM fee is above and in addition to the Base Rent fee. This information is usually discussed and confirmed on the first page of your lease document. This fee is usually charged on a monthly basis and is usually in addition with the monthly rent payment. Each tenant is responsible for their proportionate share percentage of the property. So if the property has a total of 100,000 square feet and you occupy 10,000 square feet, you would be responsible for 10% of the costs to maintain the common areas of the property.
CAM Fee Breakdown
Let me break down how the fee is formulated so there is no confusion. Again, the utilities and services that maintain the property, operating expenses, are what is included into a CAM fee. According to the AIR Commercial Real Estate Association’s lease document, the following costs that relate to the ownership and operation of the property and are defined as the Common Area Maintenance Expenses are:
1. All costs relating to the operation, repair and maintenance, in neat, clean, good order and condition, but not the replacement of the following: Common Areas and Common Area improvements, including parking areas, loading and unloading areas, trash areas, roadways, parkways, walkways, driveways, landscaped areas, bumpers, irrigation systems, common area lighting facilities, fences and gates, elevators, roofs, exterior walls of the building, building systems and roof drainage systems. Exterior signs and any tenant directories, any fire sprinkler systems and all other areas and improvements that are within the exterior boundaries of the Project but outside of the Premises and/or any other space that is occupied by a tenant.
2. The cost of water, gas, electricity and telephone to service the Common Areas and any utilities not separately metered.
3. The cost of trash disposal, pest control services, property management, security services, owner’s association dues and fees, the cost to repaint the exterior of any structures and the cost of any environmental inspections.
4. Reserves set aside for maintenance and repair of Common Areas and Common Area equipment.
5. Any increases above the Base Year property taxes.
6. Any insurance cost increase.
7. Any deductible portion of an insured loss concerning the Building or Common Areas.
8. Auditors, accountants and attorney fees and costs related to the operation, maintenance, repair and replacement of the Project.
9. Any other cost related to the operation of the Project that is in your lease.
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There are many costs and fees that can be in a Common Area Maintenance (CAM) fee. Every single one of these expenses and fees that the Landlord utilizes for the common areas of the property has to be verifiable to the tenants. The Landlord should be able to, upon request, supply you with a breakdown of the expenses and costs that he or she is passing through to the tenants. This amount is calculated on an annual basis and the landlord should be able to provide you with this information. The only way to avoid paying CAM fees is to lease a single tenant property. However, you would be responsible for 100% of the operating expenses for the property and not just your pro rata share. You would also be responsible for setting up and maintaining these expenses.
The bottom line is that landlords or agents should be able to inform you of what the existing CAM’s are for a project before you sign a lease. Having all the information will allow you to make informed decisions. If you have any further questions or are not clear on any of this information, I suggest discussing this with the agent or broker you are working with. You can also reach out to one of our commercial real estate experts here, good luck!
Commercial Real Estate Terminology
If you come across any commercial real estate lease terminology you are unfamiliar with, you can always visit our Glossary of Commercial Real Estate Terms to find out what they mean.
Digsy’s On-Demand Commercial Real Estate Experts not only help you save time finding the perfect space for your business, they also remove the stress by helping you understand rents, operating expenses and even negotiate with landlords on your behalf. You can learn more about using Digsy to find commercial real estate here.
This article was written by Digsy Partner, Matt Wagner.