It's not uncommon for business owners to make mistakes when calculating their occupancy costs. After all, it's usually just the base rent rate that's advertised. But if you want your business to run smoothly and profitably, you need to know all of the factors that contribute to occupancy costs so you can plan for the expenses. These costs are not hidden, but they're often buried in the lease contract you feel you don't have time to thoroughly read. Read it, though, and pay close attention to the following factors so you don't leave any line items out of your office space budget. Some of these factors don't have anything to do with your lease, but you still need to be aware of them.
Common Area Maintenance (CAM)
Although the property manager arranges for common area maintenance, the tenants pay for it. That means the owner adds up all the costs for garbage collection, landscaping, snow removal, etc., and divides the costs among the tenants. These costs may vary from season to season, so budget year-round and you'll never get caught short.
Property Insurance and Property Taxes
These items are lumped together because they're often treated the same way. Property insurance and property taxes are usually considered "pass-thru" expenses, meaning the property owner passes these expenses through to the tenants. These costs are split among the tenants on a pro-rata basis, usually based on the square footage occupied by each tenant.
General Liability Insurance
Most property owners will not rent space to companies without general liability insurance.
"Add-on" Expenses
"Add-on" expenses are not paid to the property owner, but they contribute to your occupancy costs. These expenses include furniture rental, janitorial services, plant services, pest control, HVAC maintenance, utilities (if they're not included in your lease), parking, and extra charges such as after-hours air conditioning. Check your lease carefully to find out which of these costs are included in your base rent and which you must plan for.
By carefully considering these occupancy cost factors for your office space, you'll be able to keep your company's finances under control and improve profitability.
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