By Tiffany Huang of EASE CRE
In the world of commercial real estate, understanding industry-specific jargon is crucial for making informed decisions. One such term you’ll frequently encounter is Common Area Maintenance (CAM). Brokers often mention CAM, and it’s important to know they’re referring to the upkeep of shared areas within a property occupied by multiple tenants, not engine parts.
What is CAM?
Common Area Maintenance (CAM) refers to the maintenance and upkeep of shared spaces within a commercial property. These areas include hallways, lobbies, restrooms, parking lots, exterior lighting, and more. CAM charges ensure these spaces remain functional and appealing for all tenants.
Calculating CAM Charges
A tenant’s share of CAM charges is typically calculated on a pro-rata basis, meaning it’s based on the tenant’s square footage relative to the total rentable space in the building or complex. These charges are usually paid monthly in addition to rent and may increase over the term of the lease.
Appropriate CAM Expenses
CAM expenses can vary depending on the property type but generally include costs for:
- Hallways
- Lobbies
- Restrooms
- Parking lots
- Exterior lighting
- Trash removal
- Insurance
However, not all expenses should be included in CAM. Costs related to replacing equipment or making capital improvements, such as roof replacements, foundation repairs, exterior wall maintenance, or significant upgrades to common areas like parking lot paving and elevators, typically fall outside of CAM charges if these improvements have a useful life of over five years.
Key Considerations for Tenants
Prospective tenants should inquire whether a CAM charge is included in the rental rate or assessed separately. Knowing this upfront is essential, as CAM charges can significantly impact your overall rental cost. For example, property taxes can rise substantially following a recent property sale, subsequently increasing CAM charges. By understanding these charges, tenants can get a clearer picture of their true monthly rental cost.
Why CAM Matters
CAM charges are a significant aspect of commercial leases and can greatly affect the total rent a business pays. To navigate these complexities, engaging a professional is advisable. At EASE CRE, we possess the expertise to help you understand all the costs involved in leasing commercial space, ensuring you make informed decisions for your business.
For more insights and assistance with your commercial real estate needs, contact EASE CRE today at 714-886-9281. Let us help you master the intricacies of commercial real estate.
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