What does CAM in CRE mean?
CAM, or Common Area Maintenance, refers to the fees that tenants pay each month to cover the costs of maintaining a property. These fees ensure that the building stays functional and in good condition. Importantly, landlords do not profit from CAM fees; instead, they use the funds solely for property maintenance. However, the specific costs included in CAM fees depend on both the type of property and the lease agreement between the landlord and tenant.
What Are CAM Charges?
In Commercial Real Estate (CRE), CAM charges often appear alongside Triple Nets (NNN). CAM charges form just one part of the total operating expenses, which also include insurance and property taxes. When someone refers to “the CAMs,” they typically mean the total operating costs of the property. Since CAM charges directly impact the net operating income (NOI), they are a crucial element in any lease agreement.
Types of Areas Covered by CAM Charges
Tenants leasing commercial properties usually pay for two types of spaces: usable areas and common areas.
- Usable area: This refers to the spaces that tenants exclusively occupy, such as private offices, restrooms, storage rooms, and other personal spaces.
- Common area: This includes shared spaces that benefit all tenants, such as lobbies, public restrooms, elevators, corridors, parking lots, and stairwells.
Where Can You Find CAM Fees in a Lease?
Typically, landlords outline CAM charges in the lease contract. If CAM fees are not specified, you should clarify this with your landlord. In some cases, CAM fees may already be included in your monthly rent. Therefore, it is essential to understand the exact CAM fees before signing a lease to avoid potential surprises down the line.
What Do CAM Charges Include?
The specific costs covered by CAM fees depend on the lease agreement and the property itself. Common CAM charges include:
- Property maintenance
- Roof and exterior building repairs
- Insurance, permits, and taxes
- Administrative fees
- Pest control services
- Security systems and services
- Operating expenses like landscaping, parking lot cleaning, lighting, signage, and snow removal
These charges can vary significantly between properties, so it’s critical to review your lease terms to understand what CAM expenses you will be responsible for.
How to Calculate CAM Charges
CAM charges are usually calculated on a per square foot (PSF) pro-rata basis. Essentially, the more space you lease, the higher your CAM charges will be. Your CAM fees are determined by the percentage of the total property that your leased area occupies.
Example:
- Tenant’s leased space: 15,000 SF
- Gross leasable area of the building: 60,000 SF
To calculate:
15,000 SF ÷ 60,000 SF = 0.25 (or 25%)
If the monthly CAM expenses total $2,000, you will pay 25%, or $500, in CAM fees each month. Typically, landlords reevaluate CAM charges annually, and they remain fixed for the year.
Summary
In conclusion, CAM charges are a vital part of any commercial real estate lease. Understanding what these charges cover and how they are calculated will help you manage your monthly expenses more effectively. Therefore, it’s always wise to review CAM terms carefully before signing any lease agreement to ensure you are fully prepared for the associated costs.
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