Do office building leases have CAM? Under the assumption they are modified gross leases
Can anyone shine light how common NNN leases are with office space? since most are MG lease, is CAM not a thing when renting office space?
[{"id": "hz7emqh", "text": "Office can be NNN.", "replies": [], "depth": 1}, {"id": "hz7fsqc", "text": "98% of the ones I have dealt with in the last 10 years have been NNN.", "replies": [], "depth": 1}, {"id": "hz7fzz6", "text": "In my market 95% of office leases are triple net leases. The only offices that I know that do any sort of gross lease are mom-and-pop landlords of small buildings.", "replies": [{"id": "hz9oob0", "text": "This is true of most of Canada. It's crazy to me that so many American markets deal with gross or modified gross leases - so much cash flow risk to lenders and landlords and just messy to manage and model out.", "replies": [{"id": "hzb5th9", "text": "There is typically a base year that established for that year\u2019s OPEX, which escalates to eliminate LL\u2019s exposure.", "replies": [{"id": "hzc62yi", "text": "Yeah I'm aware of base year plus structures but coming from an almost universally net rent national market, it seems odd for landlords to take on any expense inflation risk. \n\nIt seems like it creates a misalignment between tenants and landlords in the sense that landlords will try to strip expenses to as extreme a degree as possible whereas tenants would benefit from more moderate spending on CAM (and may be willing to pay for it under a NNN structure).", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hz7gnpo", "text": "It is very common for all commercial properties to be NNN.  This includes office.", "replies": [], "depth": 1}, {"id": "hz7iuqq", "text": "Depends on the market. Big cities and higher quality office buildings have been exclusively modified gross in my experience.", "replies": [{"id": "hzb0ukl", "text": "Which markets? Class A offices in Chicago are exclusively NNN + CAM and RE reimbursements", "replies": [], "depth": 2}], "depth": 1}, {"id": "hz7lme2", "text": "In my market a lot of the highest tier offices have full-service leases with the tenant paying a higher rate that includes CAM, janitorial and security.  The next tier, comprising most of the office properties, is triple net.  The older or lower end offices may have modified gross terms.", "replies": [], "depth": 1}, {"id": "hz7mjqy", "text": "Depending on the grade, professional office could be anywhere between NNN and full service.", "replies": [], "depth": 1}, {"id": "hz7oi9s", "text": "Depends on the market and product class. I see MG in class C office in my market, but all others are NNN or FS.\n\nI see more MG in industrial leases.", "replies": [], "depth": 1}, {"id": "hz7puwr", "text": "Most are Gross because there are a bunch of tenants that the LL divides the cost of expenses on a pro rats share basis. NNN leases are more for single tenants as they are easier to administer.\n\nCAM charges vary by tenant type and commercial real estate type.", "replies": [], "depth": 1}, {"id": "hz7rflp", "text": "Usually if it says modified gross there are additional charges somewhere in the lease.", "replies": [], "depth": 1}, {"id": "hz80z7c", "text": "Depends on the market and the way owners structure their leases.", "replies": [], "depth": 1}, {"id": "hz87aim", "text": "Most in my market are MG, with separate electric charge.", "replies": [], "depth": 1}, {"id": "hz8niw5", "text": "Depends on the deal and area. \n\nArizona is largely Full Service with a base year for class A office and an increase cap on controllables. Some call centers do NNN and some class c do MG.", "replies": [], "depth": 1}, {"id": "hz8s684", "text": "As an appraiser I deal with a lot of \u201cNNN\u201d leases but in realty we classify them as a base + CAM (common area maintance)", "replies": [], "depth": 1}, {"id": "hz8vqz7", "text": "In my markets, it\u2019s a combination of NNN, BYS (with net electric) or BYS (all expenses included in base year). Depends on the electricity situation at each and quality of building/location.", "replies": [], "depth": 1}, {"id": "hz8x1nw", "text": "I think that office has it twice\n\nFirst, under BOMA standards the physical size of the space is smaller than the lease-able area. The physical dimensions are grossed up to accommodate shared amenities, hallways, lobby's etc. It's important to know when comparing buildings with different sized common areas.\n\nSecondly, any maintenance costs are more than likely going to be borne by the tenants based on their proportionate share of the common area.\n\nIt's market and lease specific", "replies": [], "depth": 1}, {"id": "hz9aqi7", "text": "Assuming the building is being leased by knowledgeable people, then it\u2019s entirely dependent on market and sub market, and then the competitive set for that building. I\u2019ve done net leases in a cbd and then gross leases not two sub markets down the freeway.", "replies": [], "depth": 1}, {"id": "hzbu0d4", "text": "CAM is common area maintenance which is always a thing, modified gross as apposed to gross means the tenant covers some aspect of that cost and it is specified in the lease. Generally you pay more for the privilege of a gross lease but it can be difficult to predict the expenses so it\u2019s best to have shorter terms.", "replies": [{"id": "hzbx1ta", "text": "So there\u2019s no cam for modified gross correct", "replies": [{"id": "hzexbe9", "text": "No. You still have common area maintenance, the cost of it is just included in the rent.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}]