I am negotiating a small office space for a national tenant and the local rep asks me, "What are CAM fees?". Sounds easy to answer, and in fact, it used to be, but in today's real estate market this somewhat straight forward term has become a catch all phrase.
CAM used to be very standard and meant to cover Common Area Maintenance, but what it has now become is a term that encompasses any cost the owner would like to pass along to the Tenant. What this does is create a very open interpretation of what items should be included in this fee. Leases should incorporate an entire section explaining what costs will be allocated as "CAM", what items will be excluded from CAM, and how the included costs will be managed. In other words, perhaps the janitorial is included in CAM and the owner is responsible for the janitorial service, then that cost needs to also be maintained as in line with the area costs of similar services. This protects the Tenant from the landlord hiring someone at $10 and hour to clean the premises and billing the tenant as $100 per hour.
Just be very cognizant of this section, which is usually labeled "Operating Expense" , and make sure to question any portion that you may not agree with. Remember, once you sign, the deal is set in stone!
I have a new Landlord who has listed her property with me and the marketing has begun. Now, amidst these challenging times, the property has sat on the market for almost a year. The first full price offer we get is from a Psychic! Well she has had a past tenant who has created some issues over the years. That tenant is a funeral home. Needless to say, adding a psychic to her already troubled tenant of a funeral home was not something she wanted to do.
I think she made the right decision. Morale of the story? Don't just take the money when you get a tenant. If possible (financially speaking) take a step back and try to look at the long term picture, you know, from 10,000 feet. This property could easily have been used more retail oriented, and gotten higher rents had she not put the funeral home in. Oh, and BTW, make sure to enlist the help of a professional commercial real estate broker. Had she done that first, she might have been in a better place today...
A tenant rep is an real estate broker who represents a tenant in a lease renewal and/or alternatives to new locations in the market place. Why do you need a tenant rep to renew your lease? Because yo have been in that lease for the last three years and the market has changed, the inventory has changed, the pricing and terms in the market have changed, and only a commercial real estate professional is going to be able to have a handle on those changes and be able to aid you in getting the best possible outcome to the renewal or new space question.
The best part is that in 99% or the circumstances, the tenant rep will be compensation by the landlord/broker of the final space you occupy. Who doesn't like free consultations?
Buyer's take heed, your broker is really working for you - Trust them!
Read all of Your broker is really on your side...
Under the right circumstances this can be a cash cow for the seller and a needed opportunity to put the deal together with a potential buyer.
Read all of Hold the note - It's a good option!
Full Service:
This is a lease that the price quoted should include all base rent, CAM, inside suite janitorial, utilities, maintenance, parking, building insurance, property taxes, etc. In other words, you pay this price and that's all. The landlord maintains the entire property, and the company can do their work without worrying about facility issues.
Modified Gross:
This will be a price that covers only the base rent, CAM, building insurance, and property taxes. Tenant shall pay separate for inside suite janitorial, maintenance, parking, utilities, These extra expenses can run from $4.50 per sf and up depending on negotiated items.
In either scenario tenant typically pays all costs associated with IT/phone service, connections and wiring.
These are definitions based on our local market, but are fairly standard throughout the industry. Make sure you agent is explaining exactly what you are getting in the deal. Understanding the actual expenses in your transaction can be imperative and these can often be miss construed when presented to the potential tenant/client.
So you need to lease your office building and just want someone to "field a call for you and get them some quick info". Well let's just say that if you pay them it's illegal in the eyes of the Florida laws. That aside, do you really think they will be able to capture that potential buyer and give them the "hook", that is going to bring them in to see the property? Do you think they will be able to tell that broker if the lease is "modified gross" or "full service"? Do you really think some friend or maybe even a secretary that works for you is going to be able to land that potential tenant or broker on the deal?
I can tell you the answer and it's a big fat - NO.
I am baffled that owners of properties think this business is so easy that they would try this route. Information flows like water in today's market, and if the flow of information is hampered at a brokers initial call, then I assure you he will be moving onto a property that does not have that impediment and is ready to deal quickly.
Do yourself a favor and don't ask a friend to help, hire a professional the first time around and get the job done right!
It's never over...
