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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?
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Common Area Maintenance (CAM) describes the fees sustained by tenants on top of their base rent that are used to cover routine charges to preserve the shared spaces of a provided residential or commercial property.

How Does Common Area Maintenance Work?

Common location maintenance (CAM) charges are separate costs incurred each month on top of the base rent to cover expenses related to residential or commercial property maintenance.

CAM represents "Common Area Maintenance", and refers to the charges paid by occupants to their property owner for the maintenance of a residential or commercial property's typical area.

The value of typical area upkeep (CAM) tends to be higher for industrial realty (CRE) residential or commercial properties since there are more renters and shared spaces in such residential or commercial properties.

- Usable Area → The functional location is the space that rented by a specific tenant. Therefore, the usable square video footage in a building is what is inhabited by a special renter, inclusive of toilets, personal meeting rooms, and specific workplaces.

• Common Area → In contrast, the common location of a building is not rented to a private but is rather accessible to all renters for collective use. These shared locations can include lobbies, parking area, roof decks, and elevators.
  
  So, who pays for the expenses associated with maintaining the typical area?
  
  Since all renters can make use of the space, as part of the leasing agreement, each of them contribute towards such payments, typically on a pro rata basis.
  
  With those proceeds, the landlord is expected by renters to guarantee the typical locations are kept arranged and tidy, while fixing issues or fixing damages.
  
  What Does Common Area Maintenance Include?
  
  The most frequent types of common locations 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 circumstances, if the elevator shared by all occupants were to malfunction, the property manager is accountable for fixing the problem without delay.
  
  The provision relating to common area maintenance (CAM) charges is specified in industrial property leases, where the particular terms around the legal obligations of each celebration (the lessor and the lessee) are set.
  
  Furthermore, the kind of lease signed in between the two parties is essential to determining each party's particular obligations, e.g. triple internet (NNN).
  
  How to Calculate CAM Charges
  
  The CAM charges matter in property, particularly for business residential or commercial properties, due to the fact that the costs impact the total expense of dedicating to a rental plan at an offered residential or commercial property.
  
  In the majority of leasing arrangements, the occupants pay a part of the total CAM on a professional rata basis per the negotiated contract, i.e. in proportion with the amount of square video leased.
  
  The computation of each renter's typical area maintenance (CAM) cost, expressed on an annual basis, can be identified by dividing the tenant's square footage 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 Tenant into a Regular Monthly Fee (Divide by Twelve Months)
  
  Common Area Maintenance Formula (CAM)
  
  The common area upkeep (CAM) sustained by each tenant is calculated by increasing their respective pro-rata share of expenses 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 amount must be divided by twelve to convert into a month-to-month fee.
  
  Conversely, an alternative technique to determine the CAM charges is on a per square foot (sq. ft.) basis, which is done by dividing the estimated annual CAM charges by the residential or commercial property's leasable square footage.
  
  Since CAM fees are most frequently assigned based on the amount of space occupied, the tenants with more area leased will incur more CAM charges (and vice versa).
  
  Common location maintenance is usually determined on an annualized basis, and after that 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 common area maintenance (CAM) costs for the whole residential or commercial property as part of the annual budget, which affects rates.
  
  Broadly put, CAM charges fall under 2 classifications:
  
  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 unforeseeable (e.g. snow storm, fire).
  
  However, CAM cost cost caps and floorings can set restraints on how much lease can be changed.
  
  FAQ: Is Capital Investment Included in CAM?
  
  For the many part, capital investment (Capex) are excluded from common area upkeep (CAM), depending on the context of the invest.
  
  Why? Capex related the residential or commercial property enhancements, such as constructing a more modern-day fitness center for occupants, are a form of discretionary costs (and part of the property manager's cost of ownership).
  
  However, particular non-discretionary capital expenses can be classified as common location maintenance, such as fixing a broken A/C system, which impacts all existing (and future) occupants.
  
  Common Area Maintenance Calculator (CAM)
  
  We'll now move on to a modeling exercise, which you can access by completing the type below.
  
  Get the Excel Template!
  
  CAM Charges Calculation Example
  
  Suppose a residential or commercial property owner is approximating the typical location upkeep (CAM) charges expected on their business office complex for the upcoming year, 2024.
  
  The total annual CAM charges for the entire office complex are projected to be $260k, while the gross leasable area (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 location (GLA), the CAM charge per square foot is $5.20, which represents the quantity that each business tenant need to contribute based upon the quantity of square video leased per year.
  
  - CAM Charge per = $260,000 ÷ 50,000 sq. ft. = $5.20
  
  The approximated CAM charge per square video - $5.20 sq. ft. - should then be assigned in proportion with each occupant's pro-rata share.
  
  The pro-rata share is figured out by dividing the individual tenant's square footage by the gross leasable area (GLA) of the workplace building.
  
  Therefore, if one of the commercial renters rented a total of 6k sq. ft., the pro-rata share is 12%.
  
  - Pro-Rata Share (%) = 6,000 sq. ft. ÷ 50,000 sq.
  .