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1 Common Area Maintenance (CAM).

What prevails Area Maintenance?
How Does Common Area Maintenance Work?
What Does Common Area Maintenance Include?
How to Calculate CAM Charges
Common Area Maintenance Formula (CAM).
Common Area Maintenance Calculator (CAM).
CAM Charges Calculation Example.
What prevails Area Maintenance?

Common Area Maintenance (CAM) refers to the charges incurred by renters on top of their base lease that are utilized to cover regular charges to keep the shared spaces of a given residential or commercial property.

How Does Common Area Maintenance Work?

Common area maintenance (CAM) charges are separate costs sustained per month on top of the base lease to cover expenses related to residential or commercial property maintenance.

CAM represents "Common Area Maintenance", and describes the fees paid by tenants to their property owner for the maintenance of a residential or commercial property's typical location.

The importance of typical location upkeep (CAM) tends to be greater for business property (CRE) residential or commercial properties considering that there are more tenants and shared areas in such residential or commercial properties.

- Usable Area → The functional location is the area that leased by a specific occupant. Therefore, the usable square footage in a building is what is occupied by an unique tenant, inclusive of bathrooms, personal meeting spaces, and specific offices.

Common Area → On the other hand, the typical area of a building is not rented to a specific but is rather available to all tenants for cumulative use. These shared locations can include lobbies, parking area, roof decks, and elevators.

So, who pays for the expenses related to maintaining the common location?

Since all tenants can utilize the space, as part of the leasing arrangement, each of them contribute towards such payments, typically on a professional rata basis.

With those profits, the property manager is expected by renters to guarantee the typical areas are kept arranged and tidy, while fixing concerns or repairing damages.

What Does Common Area Maintenance Include?

The most regular types of common locations at residential or commercial properties include the following examples:

- Lobby and Hallway.
Open Area Workspace.
Gym (Public Gym).
Janitorial Services.
Elevators.
Parking Spaces.
Shared Amenities.
Surrounding Outdoor Areas (Pool).
Building Security and Alarm Systems.
Concierge Services.
Roofing and Landscaping

For example, if the elevator shared by all occupants were to malfunction, the property manager is accountable for fixing the issue without delay.

The stipulation pertaining to typical location maintenance (CAM) charges is stated in business real estate leases, where the specific terms around the contractual obligations of each celebration (the lessor and the lessee) are set.

Furthermore, the kind of lease signed in between the two parties is key to identifying each celebration's particular obligations, e.g. triple net (NNN).

How to Calculate CAM Charges

The CAM charges matter in property, particularly for industrial residential or commercial properties, due to the fact that the costs affect the total expense of dedicating to a rental plan at a provided residential or commercial property.

In the majority of leasing arrangements, the tenants pay a portion of the total CAM on a pro rata basis per the negotiated arrangement, i.e. in percentage with the quantity of square video footage rented.

The estimation of each tenant's typical location upkeep (CAM) cost, expressed on a yearly basis, can be identified by dividing the occupant's square video by the gross leasable area in the building.

- Step 1 → Divide the Tenant's Rentable Square Footage (RSF) by the Gross Leasable Area (GLA) of the Residential or commercial property.
Step 2 → Multiply the Pro-Rata Share (%) by the Estimated Annual CAM Charges of the Residential or commercial property.
Step 3 → Convert the Annual CAM Charge of a Renter into a Month-to-month Fee (Divide by Twelve Months)

Common Area Maintenance Formula (CAM)

The common location upkeep (CAM) incurred by each tenant is determined by multiplying their particular pro-rata share of expenses by the expected annual CAM charge.

Where:

- Pro-Rata Share (%) = Tenant Rentable Square Footage (RTF) ÷ Gross Leasable Area (GLA).
Annual CAM Charge = Σ Monthly CAM Fees × 12 Months

Since the tenant CAM charge is an annualized metric, the amount must be divided by twelve to transform into a monthly cost.

Conversely, an alternative technique to calculate the CAM charges is on a per square foot (sq. ft.) basis, which is done by dividing the estimated yearly CAM fees by the residential or commercial property's leasable square video.

Since CAM fees are frequently designated based on the quantity of area occupied, the occupants with more space rented will incur more CAM charges (and vice versa).

Common area maintenance is frequently computed on an annualized basis, and then divided into monthly payments attributable to each occupant on a per square foot basis.

Usually at the start of each year, a residential or commercial property owner will forecast the upcoming typical location upkeep (CAM) expenses for the whole residential or commercial property as part of the yearly budget plan, which affects pricing.

Broadly put, CAM charges fall under two categories:

1. Controllable Charges → The residential or commercial property owner has direct impact over manageable charges (e.g. administrative expenses, staff payroll).

Uncontrollable Charges → On the other hand, uncontrollable charges, stay outside the residential or commercial property owner's control and are unpredictable (e.g. snow storm, fire).

However, CAM charge rate caps and floors can set constraints on just how much lease can be changed.

FAQ: Is Capital Expenditure Included in CAM?
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For the most part, capital investment (Capex) are excluded from typical area upkeep (CAM), reliant on the context of the spend.

Why? Capex related the residential or commercial property enhancements, such as building a more contemporary gym for renters, are a type of discretionary spending (and part of the property owner's cost of ownership).

However, particular non-discretionary capital expenditures can be categorized as common area upkeep, such as fixing a damaged A/C system, which impacts all existing (and future) occupants.

Common Area Maintenance Calculator (CAM)

We'll now proceed to a modeling exercise, which you can access by filling out the form below.

Get the Excel Template!

CAM Charges Calculation Example

Suppose a residential or commercial property owner is approximating the typical location upkeep (CAM) charges anticipated on their commercial office complex for the upcoming year, 2024.

The overall annual CAM charges for the entire office complex are projected to be $260k, while the gross leasable location (GLA) is 50k sq. ft.

- Annual CAM Charge = $260,000.

Gross Leasable Area (GLA) = 50,000 sq. ft.

After dividing the total annual CAM charges by the gross leasable area (GLA), the CAM charge per square foot is $5.20, which represents the quantity that each business tenant need to contribute based upon the amount of square video footage leased each year.

- CAM Charge per Square Footage = $260,000 ÷ 50,000 sq. ft. = $5.20

The approximated CAM charge per square video - $5.20 sq. ft. - should then be allocated in percentage with each tenant's pro-rata share.

The pro-rata share is identified by dividing the specific occupant's square footage by the gross leasable location (GLA) of the office complex.

Therefore, if one of the commercial renters leased an overall of 6k sq. ft., the pro-rata share is 12%.

Share (%) = 6,000 sq. ft. ÷ 50,000 sq.
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