CAM Charges in Industrial Leases: How to Avoid Surprise Costs
Introduction
Common Area Maintenance (CAM) charges are one of the most misunderstood expenses in industrial leases. Many tenants underestimate how much they will pay for CAM fees or fail to negotiate cost protections—leading to unexpected increases in expenses over time.
Since most Triple-Net (NNN) leases require tenants to pay for CAM charges, understanding how they work is crucial to lease budgeting and financial planning.
In this article, we’ll cover:
✅ What CAM charges include and how they are calculated
✅ The difference between controllable and uncontrollable CAM expenses
✅ Strategies to negotiate CAM caps and reduce costs
1. What Are CAM Charges?
📌 CAM (Common Area Maintenance) fees cover the shared costs of maintaining an industrial property.
Tenants in an industrial facility share these expenses with other tenants based on their proportionate share of total leasable square footage.
🔹 Examples of CAM Charges:
Parking lot maintenance (repaving, striping, snow removal)
Landscaping and exterior upkeep
Security and lighting
Property management fees
Repairs to shared facilities (roof, elevators, HVAC, etc.)
💡 Example:
A 200,000 SF industrial park has five tenants leasing 40,000 SF each.
The total CAM expenses for the property are $500,000 per year.
Each tenant pays 20% of total CAM costs (40,000 SF / 200,000 SF).
Annual CAM charge per tenant = $100,000.
📖 Read more: "NNN Leases: Pros & Cons for Industrial Tenants."
2. How CAM Fees Are Calculated in an Industrial Lease
CAM charges are typically calculated as:
Tenant’s CAM Share = (Tenant’s SF ÷ Total Property SF) x Total CAM Expenses
🔹 Example Calculation:
A tenant leases 100,000 SF in a 500,000 SF industrial property with annual CAM expenses of $1,000,000.
(100,000 ÷ 500,000) x $1,000,000 = $200,000 per year
🔹 Monthly CAM charge: $16,667 per month.
💡 Pro Tip: Always request a detailed breakdown of CAM charges before signing a lease.
📖 Read more: "How to Negotiate an Industrial Lease (and Avoid Costly Mistakes)."
3. Controllable vs. Uncontrollable CAM Expenses
Not all CAM expenses are within the landlord’s control—understanding the difference is key.
✅ Controllable CAM Expenses:
Property management fees
Landscaping & janitorial services
Administrative costs
Parking lot repairs
🔴 Uncontrollable CAM Expenses:
Property taxes
Insurance premiums
Utility costs
Why It Matters:
Landlords can increase controllable CAM charges at their discretion, but tenants can negotiate caps on these costs.
💡 Pro Tip: Always negotiate a 5% annual cap on controllable CAM expenses to prevent excessive cost increases.
📖 Read more: "CAM Charges in Industrial Leases: How to Avoid Surprise Costs."
4. How CAM Reconciliations Can Lead to Unexpected Charges
CAM reconciliations occur when landlords review annual expenses and bill tenants for any underpaid costs.
How CAM Reconciliation Works:
1️⃣ The landlord estimates annual CAM charges and bills tenants monthly.
2️⃣ At the end of the year, actual expenses are calculated.
3️⃣ If actual expenses exceed estimates, tenants must pay the difference.
💡 Example of a CAM Reconciliation Surprise:
A tenant’s estimated CAM charges were $100,000 for the year.
After year-end reconciliation, actual expenses were $120,000.
The tenant owes an unexpected $20,000 in additional CAM charges.
📌 Negotiation Strategy:
✅ Request an annual CAM expense audit to verify actual costs.
✅ Negotiate a cap on controllable CAM charges to limit exposure to cost spikes.
5. Negotiating CAM Charges to Avoid Overpaying
CAM charges are negotiable—tenants should not accept landlord estimates without verification.
Key CAM Negotiation Strategies:
✅ Request a breakdown of historical CAM expenses for the past 3-5 years.
✅ Negotiate a cap on annual CAM increases (e.g., no more than 5% per year).
✅ Ensure capital expenditures (major building upgrades) are excluded from CAM charges.
✅ Ask for the right to audit CAM expenses annually.
💡 Example:
A tenant signs a 10-year NNN lease and negotiates a 5% cap on controllable CAM expenses.
Without a cap, their CAM charges could increase 10-15% annually.
With the cap in place, they avoid excessive rent escalations.
💡 Pro Tip: Include a “CAM Stop” clause in your lease to limit unexpected increases.
📖 Read more: "How to Negotiate an Industrial Lease (and Avoid Costly Mistakes)."
6. Final Thoughts: Controlling CAM Costs in Industrial Leases
Before signing a lease, tenants should:
✅ Request a full breakdown of CAM charges and historical expenses.
✅ Negotiate caps on controllable CAM cost increases.
✅ Understand reconciliation policies to avoid surprise charges.
✅ Ensure capital expenses are not passed through as CAM fees.
📌 Need help reviewing CAM expenses in your lease? Schedule a Consultation Today.
