FAQ: CAM Charges & Common Area Rent

Commercial Real Estate Agent with NAI Landmark Bozeman Commercial Real Estate
  • Question: The Lessee (Tenant) asked why do I also pay rent for the common area instead of just CAM charges?
  • Answer: The base rent charged for the office suites in the building are a reflection of the Lessors (Landlord)desired return on and of his investment in the building. In many cases the Lessor's investment in the common areas is greater than in the leased office suites. Common areas typically include fully handicapped bathrooms, elevators, fire/life safety elements and many times above standard finishes. All of this adds to the overall cost of the building and must be included when calculating his return on investment.

    Rentable vs. Usable: This is an area that always comes up when calculating the cost of office space. Usable square feet are the interior premises of the office suite that one actually occupies. The rentable area is the sum of the usable square feet and percentage of the common areas of the building. Clients and guests must utilize the common areas to gain access to the office suite, use the bathrooms, elevators etc. Consequently, a percentage of the common area is allocated to each usable square foot of space in the building. One thing to be aware of as a Tenant is that the ratio of common area to usable area in a well designed building will be between 11% to 15% of the total square footage (gross building area). When this percentage begins to approach 18% to 20% we term this an inefficient design which adds too much common area to the usable calculation and rent to the cost.

    The FAQ is brought to you by our expert Commercial Real Estate Agents at NAI Landmark. Special Thanks to Steve Olson, Broker. Contact Steve directly 406- 556-5074, by fax 406 556-5006 or by email steve.olson@nailandmark.com.

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I manage a building that has 2 tenants. One is a family center that has lots of activity with many people using both the rented space and common areas.(familes with many children, special meals being cooked, classes, parties etc) The other is a small business that only has a few clients dropping by. The family center is insisting on a traditional CAM percentage but I must side with the other business because it seems obvious that they are using the bathrooms and kitchen area far less that the square footage percentage comes to. Is there an accepted way of calculating CAM by usage instead of square feet?

Dec 22, 2008 09:07 AM #1
Tim Bradley
Contour Investment Properties - Jackson Hole, WY
Commercial Real Estate Expert in Jackson Hole, WY

Hi Linda,

The common area is there for the benefit of all. I wouldn't change the common area charges because one tenant uses it more than another. Let's say that the family center vacates - should the office user now pay for all of the common area since they are the only user?

I might consider charging the family center more rent because they contribute more to the wear and tear on the building, but I would not discount the rent for the other tenant.


Dec 22, 2008 12:03 PM #2
Steve Olsoln, NAI Landmark

Linda, I would tend to agree with Tim that the answer may be to charge the family center more rent. Additionally, if you can quantify the costs being created by the family center by its intense use of the common area it would give you the ammunition for the negotiation.  Your utility company may be able to help with cost analysis and your janitiorial company with paper goods, man hours etc.

Dec 23, 2008 07:58 AM #3
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