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 prevails Area Maintenance?
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Common Area Maintenance (CAM) describes the charges sustained by occupants on top of their base lease that are utilized to cover regular charges to maintain the shared spaces of an offered residential or commercial property.

How Does Common Area Maintenance Work?

Common location maintenance (CAM) charges are different costs sustained per month on top of the base lease to cover expenses associated with residential or commercial property maintenance.

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

The significance of typical area maintenance (CAM) tends to be greater for commercial real estate (CRE) residential or commercial properties given that there are more occupants and shared spaces in such residential or commercial properties.

- Usable Area → The usable location is the space that leased by a specific tenant. Therefore, the functional square footage in a structure is what is occupied by an unique occupant, inclusive of washrooms, personal conference spaces, and private workplaces.

• Common Area → On the other hand, the common area of a structure is not leased to a private but is rather available to all occupants for collective use. These shared areas can include lobbies, parking space, roof decks, and elevators.
  
  So, who pays for the expenses connected to preserving the common area?
  
  Since all tenants have the right to use the space, as part of the leasing agreement, each of them contribute towards such payments, generally on a pro rata basis.
  
  With those proceeds, the property owner is expected by tenants to guarantee the common locations are kept organized and tidy, while fixing issues or repairing damages.
  
  What Does Common Area Maintenance Include?
  
  The most regular types of common areas at residential or commercial properties consist of the following examples:
  
  - 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 instance, if the elevator shared by all renters were to malfunction, the property owner is accountable for repairing the problem without delay.
  
  The clause relating to common location maintenance (CAM) charges is mentioned in commercial real estate leases, where the specific terms around the contractual responsibilities of each celebration (the lessor and the lessee) are set.
  
  Furthermore, the kind of lease signed in between the two celebrations is essential to identifying each party's respective responsibilities, e.g. triple internet (NNN).
  
  How to Calculate CAM Charges
  
  The CAM charges matter in property, especially for commercial residential or commercial properties, since the charges affect the overall expense of dedicating to a rental arrangement at a given residential or commercial property.
  
  In many leasing contracts, the tenants pay a part of the total CAM on a pro rata basis per the worked out contract, i.e. in percentage with the quantity of square footage rented.
  
  The computation of each renter's common location maintenance (CAM) charge, expressed on a yearly basis, can be identified by dividing the tenant's square video footage by the gross leasable location 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 Monthly Fee (Divide by Twelve Months)
  
  Common Area Maintenance Formula (CAM)
  
  The common location maintenance (CAM) sustained by each renter is calculated by multiplying their respective pro-rata share of expenses by the anticipated 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 transform into a regular monthly charge.
  
  Conversely, an alternative technique to compute 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 footage.
  
  Since CAM fees are most frequently assigned based upon the quantity of space occupied, the renters with more space rented will sustain more CAM charges (and vice versa).
  
  Common location maintenance is most frequently determined on an annualized basis, and after that divided into regular 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 upkeep (CAM) expenses for the whole residential or commercial property as part of the annual budget, which impacts prices.
  
  Broadly put, CAM charges fall under two 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, uncontrollable charges, remain outside the residential or commercial property owner's control and are unpredictable (e.g. snow storm, fire).
  
  However, CAM charge price caps and floorings can set constraints on just how much rent can be changed.
  
  FAQ: Is Capital Investment Included in CAM?
  
  For the many part, capital investment (Capex) are excluded from typical area upkeep (CAM), reliant on the context of the invest.
  
  Why? Capex related the residential or commercial property enhancements, such as developing a more modern fitness center for tenants, are a form of discretionary spending (and part of the property owner's expense of ownership).
  
  However, specific non-discretionary capital investment can be categorized as common area upkeep, such as fixing a damaged A/C system, which impacts all existing (and future) tenants.
  
  Common Area (CAM)
  
  We'll now carry on to a modeling workout, which you can access by completing the form below.
  
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  CAM Charges Calculation Example
  
  Suppose a residential or commercial property owner is approximating the typical area upkeep (CAM) charges expected on their industrial office structure for the upcoming year, 2024.
  
  The overall annual CAM charges for the whole office building 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 annual CAM charges by the gross leasable area (GLA), the CAM charge per square foot is $5.20, which represents the quantity that each industrial tenant must contribute based upon the quantity of square footage rented per year.
  
  - CAM Charge per Square Footage = $260,000 ÷ 50,000 sq. ft. = $5.20
  
  The approximated CAM charge per square footage - $5.20 sq. ft. - should then be designated in proportion with each renter's pro-rata share.
  
  The pro-rata share is figured out by dividing the specific occupant's square video by the gross leasable area (GLA) of the office complex.
  
  Therefore, if one of the commercial tenants rented an overall of 6k sq. ft., the pro-rata share is 12%.
  
  - Pro-Rata Share (%) = 6,000 sq. ft. ÷ 50,000 sq.
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