What are reasonable CAM costs?
Currently managing a strip center with mom/ pop shops for a client. The projected CAM expenses for this year seems high as it's coming out to $1.41/ sf / month. A hefty chunk of that coming from property taxes. This is the first year the tenants will be paying the actual estimated CAM expenses as the previous manager before was charging a flat CAM fee of $0.70/ sf / month. 

I'm still new to managing commercial properties so I don't know if this CAM expense is typical to commercial tenants. What would be a reasonable CAM expense in terms to rent? Also, I don't know if the tenants are going to be able to handle this sudden increase. Should I ask the tenants for their business sales to figure out how much they would be able to take on, and ask the LL to eat the costs until we eventually increase to the actual CAM expense? My initial thought is that if the tenants are used to paying $635 per month, increase the CAM to $700 per month, and increase that figure annually? But that subtle increase would still be far off from the actual CAM expenses. What would be the best strategy to appease both the landlord and keep tenants from suffocating? Thanks a ton.
[{"id": "fhrrcoh", "text": "Per foot does not seem offensive, may have to eat the leakage if tenants can\u2019t/won\u2019t pay.", "replies": [{"id": "fhtkmr3", "text": "Understood. Thank you for the reply.", "replies": [], "depth": 2}], "depth": 1}, {"id": "fhrvuyp", "text": "That's a tough situation. I would hate to lower cam because those expenses have to be covered. One other option is you could keep the cam where you are projecting it to be, and maybe offer base rent relief to the tenants on a case by case basis. Lower base rent, or maybe a few the tenants break the lease and you find new tenants. Maybe a a mixture of each, with the first tenants leaving and subsequent ones getting discounts or relief?\n\nYour landlord's decision is going to be based on market conditions, their degree of leverage and risk tolerance.\n\nI hope you advise them well.\n\nPS, where I am, CAM is $10 us per foot and base rent is $30, with some variance in each. What is reasonable in one market is not in another.", "replies": [{"id": "fhtosuc", "text": "Yeah, it's a bit of a tricky situation as I'm also wondering if this CAM expense figure is going turn off potential new tenants if the current tenants were to leave. Doing it on a case by case basis is a good idea, do you think asking tenants for their business sales would be the most effective way of going about this? What would be the advantage of lowering the base rent instead of the CAM expense? Appreciate your input.", "replies": [{"id": "fhtweyu", "text": "Or renew leases or lease amendments with a higher base rent in lieu of CAM. You can also offer estimated prepayments with a true up at year end, so they are paying it monthly instead of year end lump sum. Our CAM was over $11 on a class A building. \n\nI would absolutely not base if off of a tenant's business sales, that has nothing to do with the associated costs of running your business which is what CAM captures. New tenants will compare the average CAM for a comparable of space; it could cause issue with tenants that are more successful and yet having to paying more for the very same line items. \n\nThe income from CAM also affects your CAP rate as it is part of the building cash flow. As stated above post, you may have to do a cushion into the new CAM rates but as you renew or have new tenants in place, I would have all tenants on the same basis. You can write leases using a base stop for forward years. \n\nYou should do a review of taxes and see how they compare year to year. Has there been a big increase? Or has the billings been undercharging? Do tenants have the right to an audit? You should be billing to actual expenses incurred and have the back up available.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fhvdqgd", "text": "Do market research through comps listed on Loopnet or contact JLL and ask for their retail data. If taxes have gone up, then the competition is in the same boat as you.\n\nAlso, don't forget to check the leases. Do the leases state a cap CAM rate increase? Do they mention percentage rent?", "replies": [], "depth": 1}]