May 06, 2016

Strategically Managing CAM Expenses

By Don Catalano



Common area maintenance charges are a part of occupying leased commercial real estate space. However, while the landlord is generally in the driver's seat, there could still be room for you to strategically manage your CAM expenditures and potentially save some money. Here are some tips to keep in mind both when you're negotiating a lease and when you're occupying space.

Don't Forget About CAMs

When you are looking for space to rent, don't forget to ask about CAMs. One time-tested marketing strategy employed by some landlords is to lower asking rents and make it up with higher common area management charges. While CAM charges might seem fixed -- utility costs should be the same from building to building -- there are ways that your landlord can make them higher and build in profit. As such, always consider the total rent when looking at new spaces.


This might seem counterintuitive, but you can also minimize CAM charges by looking at spaces where you will be the least efficient tenant in the building. If you do this, your CAMs will be calculated as your pro rata share of what the building as a whole uses, instead on the basis of what you actually use. So if everyone else uses less, they end up subsidizing your activities.


Know What Your CAM Charges Include

CAMs aren't always exactly the same from building to building. One might include interior repairs, while another has you do your own work. Janitorial inside your space might or might not be included, and utilities and service like water or garbage service could be billed in common or separately. Knowing what you pay for directly and what you pay for as a part of the building can help you plan expenditures to lower occupancy costs.


Do It Yourself

If possible, try to exclude as many expenses from the common area as you can. This brings two benefits. First, it gives you an opportunity to bid them out yourself and potentially find a lower price. Even seemingly small expenditures like having a light bulb changed or a washer replaced in a leaky faucet can become very expensive when billed through a maintenance service. When your lease allows it, having your office manager do the same job can turn a $100 project into a $5 project.


Second, if your landlord imposes a CAM admin fee, direct billing of the service lets you get out of paying that admin fee. With fees sometimes running as high as 15 percent, this strategy could easily save you thousands of dollars per year.


Audit Your CAMs

Most leases give you the right to request an auditing of all of your common area maintenance charges, usually on an annual basis. This is usually a wise strategy to take. Calculating CAM charges is a complicated process and many landlords make honest errors in the process. Strangely, those errors are more likely to be in their favor than yours. An audit can help you to find and fix them.


Invest Strategically in Your Space

Finally, look to see what your rights are with regards to investments in your space and its efficiency. While upgrades like solar panels might take longer than your lease period to recoup, water efficiency tweaks, insulation and lighting upgrades can pay back in a few years, especially if utility rebates are included. Whether you fund them yourself and reduce your expenses or your landlord does it, bills you for the work, then reduces your CAMs, you could save money and make your business greener.


Here are some other good articles to check out:

Introduction to CAMs

How You Pay for "Your" Common Area

4 Things to Avoid in Commercial Real Estate


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Don Catalano

Don Catalano