Common Area Maintenance (CAM) charges are a necessary but often misunderstood component of commercial leases. For both landlords and tenants, these fees allow for shared spaces are well-maintained. However, that doesn’t mean it’s a cut and dry type of fee. It’s more often the case that their complexity leads to confusion, unexpected costs, and even disputes.
Tenants often underestimate how much CAM charges can impact their bottom line. A CBRE report found that these fees can account for up to 15% of total lease costs, making them a huge factor in budgeting and lease negotiations. Meanwhile, landlords rely on CAM provisions to fairly distribute the costs of maintaining a property while keeping base rents competitive.
Despite their importance, CAM charges are rarely straightforward. A lack of transparency in calculations, unexpected escalations, and vague lease language can create unneeded tension between landlords and tenants. In fact, 74% of tenants express concerns about unclear CAM invoices. This underscores the importance of knowing just what’s included in CAM fees, how they are calculated, and what protections tenants have against excessive or unjustified charges.
How CAM Charges Are Calculated
CAM fees are typically based on a pro-rata share allocation, with adjustments for vacancies through gross-up clauses, and are subject to an annual reconciliation process to ensure accuracy.
Pro-Rata Share Allocation
The core principle of CAM charges is pro-rata cost sharing, meaning, each tenant pays a percentage of the total CAM expenses proportional to the space they lease. This is usually calculated using the following formula:
For example, if a tenant leases 3,500 sq. ft. in a 35,000 sq. ft. building, they are responsible for 10% of the total CAM expenses. Most landlords estimate annual CAM costs upfront, dividing the total into monthly payments collected with rent.
At the end of the lease year, a CAM reconciliation process takes place. The actual expenses are compared against the estimated amounts paid throughout the year. If tenants have overpaid, they receive a credit or refund; if they have underpaid, they must cover the shortfall in a lump sum. This true-up process ensures tenants pay only their fair share of actual operating costs, unless the lease specifies a fixed CAM charge instead of a variable one.
CAM Charges Calculator
Use this simple CAM calculator to quickly estimate your share of CAM expenses based on your leased space, the total building size, and overall operating costs.
Gross-Up Clauses: Adjusting for Occupancy
One major complication in CAM calculations is vacancy. If a building is only partially occupied, the landlord’s expenses don’t disappear-hallways still need to be cleaned, and common areas still require day-to-day maintenance. To address this, many leases include a gross-up provision, which adjusts variable costs as if the building were more fully occupied, typically at 90% or 95% occupancy.
For example, if a building is 50% leased, janitorial and utility costs would naturally be lower than at full occupancy. A 95% gross-up provision allows landlords to calculate CAM charges as if the building were 95% leased, ensuring that each tenant pays a fair share of costs that would exist in a fully functional building. However, gross-ups only apply to variable costs, such as:
- Cleaning services (vacant suites don’t need cleaning, but common areas still do)
- Utilities (HVAC, water, and electricity usage rise with occupancy)
- Restroom supplies (higher occupancy means more use)
Fixed costs like property taxes, insurance, and landscaping are not subject to gross-up, as they don’t fluctuate with occupancy.
CAM Reconciliation Process: Ensuring Accuracy
At the end of each year, landlords must perform a CAM reconciliation, comparing actual costs to the estimated charges billed to tenants. This process includes:
- Providing an itemized statement of CAM expenses incurred.
- Adjusting for overpayments or underpayments, tenants receive a credit for overpayments or a bill for shortfalls.
- Applying the gross-up (if applicable) to ensure fair cost distribution across occupied space.
Many leases allow tenants to audit CAM charges to verify accuracy. However, leases often impose a time limit (e.g., 30 to 90 days) to challenge discrepancies, and some include “pay now, dispute later” clauses, requiring tenants to pay disputed amounts upfront before initiating a review.
A transparent reconciliation process reduces disputes and ensures both landlords and tenants operate on a fair and predictable cost structure. Landlords recover the actual costs of maintaining the property (plus any agreed-upon administrative fees), while tenants avoid paying for unexpected or unjustified expenses.
Cost Variations by Industry and Location
CAM charges vary significantly depending on property type, geographic location, and lease structure. Whether leasing an office, retail, or industrial space, tenants should understand how different expenses impact their CAM obligations and how regional differences influence pricing.
Industry Differences: Retail, Office, and Industrial CAM Costs
The type of commercial property has a major influence on CAM fees. Each sector has a unique mix of shared spaces and services, which affects the types of costs included and the overall cost per square foot:
| Expense | Office | Retail | Industrial |
|---|---|---|---|
| Common-area electricity | ✓ | ✓ | ✓ |
| Interior janitorial (lobbies, hallways, restrooms) | ✓ | ✗ | ✗ |
| Exterior cleaning (parking, sidewalks, building facade) | ✓ | ✓ | ✓ |
| Landscaping & irrigation | ✓ | ✓ | ✓ |
| Snow removal (where applicable) | ✓ | ✓ | ✓ |
| Parking lot maintenance | ✓ | ✓ | ✗ |
| Security personnel or surveillance systems | ✓ | ✓ | ✗ |
| HVAC maintenance for common areas | ✓ | ✓ | ✗ |
| Elevators & escalators | ✓ | ✓ | ✗ |
| Signage & wayfinding maintenance | ✓ | ✓ | ✗ |
| Property management fees | ✓ | ✓ | ✓ |
| Trash removal & waste disposal | ✓ | ✓ | ✓ |
| Restroom supplies & maintenance | ✓ | ✗ | ✗ |
| Fire suppression/alarm maintenance | ✓ | ✓ | ✓ |
| Pest control | ✓ | ✓ | ✓ |
- Retail Centers: Costs depend on property type, of course. Higher-end strip malls have moderate CAM costs typically in the $8 – $12/sq. ft range (parking lot maintenance, landscaping, security, etc). This reflects the increased maintenance and aesthetic appeal that’s expected by the clientele.
- Office Buildings: These properties typically have higher CAM costs due to lobby maintenance, elevators, shared restrooms, and extensive HVAC use. Cleaning, security, and climate control drive up expenses, to say nothing of location (this can be a big differentiator for CAM charges in office buildings).
- Industrial Parks: CAM is generally lowest in this category because warehouses and flex spaces have fewer shared areas. Costs are typically limited to driveway maintenance, exterior lighting, and minimal landscaping.
Retail Centers
Office Building
Industrial
Geographic Variations: How Location Affects CAM Costs
Beyond property type, geography plays a major role in CAM pricing. Larger cities with higher labor, energy, and maintenance costs drive up expenses, while smaller markets or regions with lower costs of living tend to have lower CAM rates.
For example, in Chicago’s Loop, CAM costs for office buildings average $10–$11 per sq. ft., driven by unionized janitorial staff, high security requirements, and older infrastructure requiring frequent maintenance. Meanwhile, in Des Moines, Iowa, CAM costs might range from $4–$6 per sq. ft., due to lower wages and fewer operating restrictions.
Key regional differences include:
- High-cost urban markets (e.g., Los Angeles, Washington, D.C., Miami) tend to have higher CAM rates due to labor costs, expensive utilities, and extensive property maintenance.
- Smaller metros and suburban areas (e.g., Omaha, Kansas City, or Jacksonville) see lower CAM costs due to cheaper labor, less maintenance-intensive properties, and fewer regulatory expenses.
- Climate-related factors also affect CAM. Northern cities incur snow removal costs each winter, while Southwestern cities often see higher water and HVAC expenses due to irrigation and air conditioning needs.
- Tax implications: While property taxes are usually separate from CAM, some leases bundle taxes with CAM as “operating costs.” High-tax areas like California and New Jersey lead to higher pass-through costs for tenants.
Even within a single metro area, CAM rates can fluctuate widely. An older shopping center in Atlanta may have higher CAM costs than a newer one due to aging HVAC systems and increased repair needs. Similarly, a Dallas industrial park with mostly small tenants may have higher CAM per square foot than a similar property with larger anchor tenants, who often negotiate caps or exclusions that shift more costs onto smaller tenants.
Why CAM Benchmarking Matters
Because there’s no “standard” CAM rate, tenants should compare their CAM costs to similar properties in their market. For instance, a suburban office park in Phoenix will have dramatically different CAM pricing than a downtown high-rise in Seattle. Benchmarking helps tenants identify reasonable charges and negotiate more favorable terms when reviewing lease agreements.
CAM Negotiation for Tenants and Landlords
CAM charges are often framed as standard operating costs, but the reality is that they’re highly negotiable. The key is to strike a balance.
Tenants want predictable costs and transparency, while landlords need to recover operating expenses efficiently without creating disputes that drive tenants away. A well-negotiated CAM structure can make a big difference in the long-term relationship for both parties.
1. Clarifying CAM Expenses to Prevent Disputes
Tenants should ensure they aren’t responsible for expenses that should be borne by the landlord, such as capital improvements, legal fees, or marketing costs. On the other hand, landlords must structure CAM provisions to cover legitimate shared costs while maintaining flexibility to adapt to changing expenses.
For example, a landlord investing in a major HVAC replacement may try to pass the cost through CAM, arguing it benefits all tenants. While that’s true, a fair compromise would be to amortize those costs over several years rather than billing tenants in a single year. This approach protects tenants from sudden cost spikes while allowing landlords to recover necessary improvements.
This is a perfect example of why clarification is needed. A well-drafted lease should also distinguish operating repairs (which tenants typically share in) from capital investments (which should remain the landlord’s responsibility unless they reduce long-term operating costs). The clearer this language is, the fewer disputes arise down the road.
2. Managing Cost Increases with Caps and Expense Stops
No tenant wants to see their CAM charges skyrocket unexpectedly, and landlords don’t want to be stuck covering rising costs out of pocket. A common solution is negotiating caps on controllable CAM expenses, usually in the 3–5% annual range. This which prevents excessive increases, while still allowing landlords to adjust for inflation and vendor changes.
Landlords, however, may resist caps that restrict their ability to recover costs. A fair trade-off is distinguishing between controllable and uncontrollable expenses. Controllable expenses, such as janitorial services and property management fees, can be capped, while uncontrollable costs like property taxes and insurance remain exempt from limits.
In office leases, tenants often negotiate an expense stop—meaning the landlord covers costs up to a base year level, and the tenant is responsible only for increases beyond that amount. This approach provides cost stability for tenants while ensuring landlords don’t shoulder the full burden of rising expenses.
3. Fairness in Gross-Up Provisions
As mentioned above, this prevents landlords from under-recovering costs when vacancy rates are high. While gross-ups protect landlords from revenue shortfalls, they must be structured fairly to avoid overburdening tenants. A well-negotiated lease should:
- Apply gross-up only to variable costs (not fixed expenses like landscaping or property taxes).
- Use a reasonable assumed occupancy level (95% is standard, while 100% may unfairly inflate costs).
- Clearly define the gross-up formula to prevent manipulation of calculations.
By ensuring transparency in gross-up provisions, tenants can avoid paying for “phantom expenses” tied to vacant spaces, and landlords can maintain predictable cost recovery.
4. Transparency and Audit Rights
Disputes over CAM charges often stem from a lack of transparency. Tenants want to understand exactly what they’re paying for, while landlords need to ensure they aren’t leaving recoverable costs on the table. The best way to address this is through audit rights and detailed annual CAM statements.
A lease should specify that the landlord provides an itemized breakdown of CAM expenses each year. This ensures tenants can verify costs and identify any discrepancies. Many leases also allow tenants to audit CAM charges—meaning they or an auditor can review the landlord’s books to confirm accuracy.
For landlords, this means maintaining clean and well-documented financial records, reducing the risk of prolonged disputes. If tenants know they have the right to review costs, landlords are less likely to pad expenses or include unjustified charges.
5. Find the Right Balance in Admin Fees
Landlords often charge administrative fees (typically 10–15% of CAM expenses) as compensation for managing the property’s common areas. While these fees are standard, tenants should ensure they are reasonable and justified.
Some landlords double-dip, charging both an administrative fee and a separate property management fee. Tenants should negotiate to either cap administrative fees (at 5–10% instead of 15%) or ensure they aren’t paying twice for the same service.
From the landlord’s perspective, administrative fees should be clearly defined in the lease to avoid disputes. If a tenant raises concerns, landlords can justify these fees by demonstrating the actual costs incurred in managing the property.
6. Understand the Impact of Anchor Tenants on CAM Costs
In retail centers, anchor tenants like as big-box stores or grocery chains will often negotiate special CAM deals that reduce their expenses, shifting more costs onto smaller tenants. If smaller tenants aren’t aware of these deals, they may unknowingly end up paying a disproportionate share of CAM costs.
To ensure fairness, tenants should ask:
- How are CAM costs are allocated across tenants? This is especially important if anchors have special carve-outs.
- What happens if an anchor tenant leaves? Will remaining tenants absorb their CAM burden?
7. Have Accurate Square Footage Calculations
Because CAM is based on square footage, any miscalculation can mean thousands of dollars in unnecessary charges (especially over time!). Tenants should verify that:
- The landlord’s measurements are based on an industry-standard method (such as BOMA).
- The lease specifies how rentable square footage is calculated, including how common areas are factored in.
- Any remeasurement clauses protect against unexpected increases in CAM obligations.
You’ll also want to clarify how newly added space or changes in the building will affect your pro-rata share. Tenants will want to protect themselves from situations where the landlord might remove common areas or remeasure in a way that unexpectedly increases your percentage.
8. Explore Alternative CAM Structures Altogether
For tenants who want budget predictability, alternative CAM structures may be worth negotiating. Options include:
- Fixed CAM fees with set annual increases (common in retail leases).
- CAM stop provisions that limit expenses beyond a base year.
- Gross leases, where CAM is bundled into rent, shifting risk to the landlord.
While landlords may prefer traditional pass-through CAM models, offering fixed or hybrid structures can be a competitive advantage in attracting tenants.
More Prep = Less Stress
At their core, CAM charges are about fair cost-sharing, but fairness is determined by what’s written in the lease, not by assumptions or expectations. Courts rarely intervene to “balance” a one-sided agreement, meaning tenants must negotiate wisely upfront, and landlords must strictly adhere to the lease terms they set.
The most effective way to prevent disputes is clarity and process. When both parties explicitly define CAM provisions, follow agreed-upon procedures (such as timely reconciliations and transparent expense breakdowns), and keep negotiations realistic, CAM charges become a manageable business expense rather than a recurring source of tension. Of course, if all else fails, hiring a real estate attorney to advise you is never a bad move.
