Common Area Maintenance (CAM).

What is Common 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 is Common Area Maintenance?

Common Area Maintenance (CAM) refers to the fees incurred by renters on top of their base lease that are utilized to cover regular charges to preserve the shared areas of an offered residential or commercial property.
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How Does Common Area Maintenance Work?

Common area upkeep (CAM) charges are separate fees incurred monthly on top of the base rent to cover expenses related to residential or commercial property maintenance.

CAM means "Common Area Maintenance", and describes the costs paid by occupants to their proprietor for the upkeep of a residential or commercial property's common area.

The significance of typical area maintenance (CAM) tends to be higher for industrial property (CRE) residential or commercial properties given that there are more renters and shared areas in such residential or commercial properties.

- Usable Area → The functional location is the area that leased by a particular occupant. Therefore, the usable square video in a building is what is occupied by an unique tenant, inclusive of toilets, personal conference spaces, and individual workplaces.

Common Area → In contrast, the typical area of a building is not rented to a private but is rather available to all occupants for collective use. These shared areas can consist of lobbies, parking space, roof decks, and elevators.

So, who pays for the expenses associated with keeping the typical location?

Since all tenants deserve to make use of the space, as part of the leasing contract, each of them contribute towards such payments, typically on a professional rata basis.

With those proceeds, the proprietor is expected by occupants to ensure the typical areas are kept organized and clean, while fixing issues or fixing damages.

What Does Common Area Maintenance Include?

The most frequent kinds of typical areas at residential or commercial properties include the copying:

- 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 tenants were to malfunction, the property owner is accountable for repairing the problem quickly.

The provision referring to common location upkeep (CAM) charges is mentioned in business property leases, where the particular terms around the contractual obligations of each party (the lessor and the lessee) are set.

Furthermore, the kind of lease signed in between the 2 parties is crucial to figuring out each party's particular obligations, e.g. triple web (NNN).

How to Calculate CAM Charges

The CAM charges matter in real estate, particularly for commercial residential or commercial properties, because the charges impact the overall cost of committing to a rental plan at an offered residential or commercial property.

In the majority of leasing arrangements, the renters pay a portion of the total CAM on a pro rata basis per the arrangement, i.e. in proportion with the quantity of square footage leased.

The estimation of each occupant's common area upkeep (CAM) fee, revealed on a yearly basis, can be figured out by dividing the renter's square footage 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 maintenance (CAM) sustained by each tenant is computed by multiplying their particular pro-rata share of costs by the expected yearly 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 quantity needs to be divided by twelve to convert into a regular monthly fee.

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

Since CAM fees are most frequently allocated based on the quantity of space inhabited, the tenants with more area leased will incur more CAM charges (and vice versa).

Common area upkeep is frequently computed on an annualized basis, and then divided into month-to-month payments attributable to each tenant on a per square foot basis.

Usually at the start of each year, a residential or commercial property owner will project the upcoming typical area upkeep (CAM) costs for the entire residential or commercial property as part of the annual budget plan, which affects rates.

Broadly put, CAM charges fall under 2 classifications:

1. Controllable Charges → The residential or commercial property owner has direct influence over manageable charges (e.g. administrative costs, personnel payroll).
Uncontrollable Charges → On the other hand, uncontrollable charges, remain outside the residential or commercial property owner's control and are unpredictable (e.g. snow storm, fire).

However, CAM fee cost caps and floorings can set constraints on just how much lease can be changed.

FAQ: Is Capital Investment Included in CAM?

For the a lot of part, capital expenses (Capex) are omitted from typical location maintenance (CAM), based on the context of the invest.

Why? Capex related the residential or commercial property improvements, such as constructing a more modern health club for tenants, are a type of discretionary costs (and part of the property manager's expense of ownership).

However, certain non-discretionary capital expenditures can be classified as typical area maintenance, such as repairing a damaged A/C system, which affects all existing (and future) occupants.

Common Area Maintenance Calculator (CAM)

We'll now proceed to a modeling workout, which you can access by completing the type listed below.

Get the Excel Template!

CAM Charges Calculation Example

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

The total yearly 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 yearly CAM charges by the gross leasable area (GLA), the CAM charge per square foot is $5.20, which represents the quantity that each business occupant should contribute based upon the amount of square footage rented per year.

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

The estimated CAM charge per square video - $5.20 sq. ft. - need to then be allocated in proportion with each tenant's pro-rata share.

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

Therefore, if one of the industrial occupants rented an overall of 6k sq. ft., the pro-rata share is 12%.
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- Pro-Rata Share (%) = 6,000 sq. ft. ÷ 50,000 sq.
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