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 is Common Area Maintenance?

Common Area Maintenance (CAM) refers to the charges incurred by tenants on top of their base rent that are utilized to cover regular charges to preserve the shared areas of a given residential or commercial property.

How Does Common Area Maintenance Work?

Common location upkeep (CAM) charges are separate fees incurred monthly on top of the base lease to cover costs associated with residential or commercial property maintenance.

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

The importance of common area maintenance (CAM) tends to be greater for commercial property (CRE) residential or commercial properties considering that there are more renters and shared spaces in such residential or commercial properties.

- Usable Area → The functional location is the area that leased by a specific renter. Therefore, the usable square video footage in a building is what is inhabited by a special occupant, inclusive of washrooms, private meeting spaces, and specific 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 include lobbies, parking space, roofing decks, and elevators.
  
  So, who pays for the expenses associated with preserving the common location?
  
  Since all renters can utilize the space, as part of the leasing contract, each of them contribute towards such payments, typically on a pro rata basis.
  
  With those proceeds, the property owner is anticipated by tenants to ensure the typical areas are kept arranged and tidy, while fixing concerns or repairing 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.
• Fitness Center (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 landlord is responsible for repairing the problem quickly.
  
  The stipulation relating to common area maintenance (CAM) charges is stated in commercial realty leases, where the particular terms around the legal obligations of each celebration (the lessor and the lessee) are set.
  
  Furthermore, the type of lease signed in between the two celebrations is essential to figuring out each celebration's respective commitments, e.g. triple net (NNN).
  
  How to Calculate CAM Charges
  
  The CAM charges matter in property, especially for industrial residential or commercial properties, since the fees affect the total expense of dedicating to a rental arrangement at a provided residential or commercial property.
  
  In most leasing agreements, the renters pay a portion of the overall CAM on a pro rata basis per the worked out agreement, i.e. in percentage with the quantity of square video leased.
  
  The calculation of each renter's common area maintenance (CAM) fee, revealed on a yearly basis, can be determined by dividing the occupant's square video by the gross leasable area in the structure.
  
  - 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 Regular Monthly Fee (Divide by Twelve Months)
  
  Common Area Maintenance Formula (CAM)
  
  The typical location upkeep (CAM) sustained by each occupant is computed by increasing their respective pro-rata share of expenses by the anticipated 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 needs to be divided by twelve to convert into a regular monthly cost.
  
  Conversely, an alternative method to calculate the CAM charges is on a per square foot (sq. ft.) basis, which is done by dividing the approximated annual CAM fees by the residential or commercial property's leasable square video footage.
  
  Since CAM costs are frequently allocated based on the amount of area occupied, the occupants with more area leased will sustain more CAM charges (and vice versa).
  
  Common area upkeep is frequently calculated on an annualized basis, and then divided into regular monthly payments attributable to each renter on a per square foot basis.
  
  Usually at the start of each year, a residential or commercial property owner will forecast the upcoming common area upkeep (CAM) expenses for the entire residential or commercial property as part of the annual budget, which affects rates.
  
  Broadly put, CAM charges fall under 2 categories:
  
  1. Controllable Charges → The residential or commercial property owner has direct impact over manageable charges (e.g. administrative costs, staff payroll).
• Uncontrollable Charges → On the other hand, unmanageable charges, remain outside the residential or commercial property owner's control and are unpredictable (e.g. snow storm, fire).
  
  However, CAM charge cost caps and floorings can set restrictions on how much rent can be adjusted.
  
  FAQ: Is Capital Expenditure Included in CAM?
  
  For the most part, capital expenditures (Capex) are excluded from typical location maintenance (CAM), depending on the context of the spend.
  
  Why? Capex related the residential or commercial property improvements, such as developing a more contemporary gym for renters, are a kind of discretionary spending (and part of the landlord's cost of ownership).
  
  However, specific non-discretionary capital investment can be classified as typical location maintenance, such as repairing a broken 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 the common area upkeep (CAM) charges expected on their industrial workplace structure for the upcoming year, 2024.
  
  The overall yearly CAM charges for the entire office complex are predicted 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 overall yearly CAM charges by the gross leasable area (GLA), the CAM charge per square foot is $5.20, which represents the amount that each industrial tenant should contribute based on the amount of square video footage rented annually.
  
  - CAM Charge per Square Footage = $260,000 ÷ 50,000 sq. ft. = $5.20
  
  The approximated CAM charge per square footage - $5.20 sq. ft. - must then be assigned in percentage with each tenant's pro-rata share.
  
  The pro-rata share is identified by dividing the private renter's square footage by the gross leasable location (GLA) of the office structure.
  
  Therefore, if one of the business renters leased 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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