Annual CAM Increases

Recently, I received a call from a franchisee who was upset about his CAM (Common Area Maintenance) increases. For a 4200-sf restaurant endcap on the edge of town, the franchisee was paying around $6 psf in CAM charges. The $6 psf CAM charge reflected a recent 5% increase. His question: “What can I do to get my CAM charge down?”

“Yikes”, I said. Not because of the CAM rate (this is actually a very decent CAM rate), or the CAM increase, but the fact that he wanted a reprieve in CAM costs. CAM is notoriously difficult to negotiate down, especially once you’ve signed the lease. “You’ll have better luck negotiating a lower base rent”, I told him. I needed more information about his situation.

The franchisee told me that the property had just been flipped. “What are your neighbors paying in base rent and in CAM?” I asked. He wasn’t sure, but he made an effort to go find out. In the meantime, I called a broker I knew in the community and asked her what the comparables were for his area. “Even in an endcap, he’s paying about $1.50 psf over market”, the broker told me.

With this information and the intel from the adjacent tenants in the shopping center, the franchisee was able to negotiate a lower base rent rate. How is it possible to lower your rent rate after you’ve signed a lease? You need to communicate with the Landlord. If you’re feeling a pinch for whatever reason, communicate that to their team. You don’t get anything if you don’t ask!

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