OpEx and CAM Expenses in Commercial Real Estate Accounting

If you had to guess how much money is lost due to OpEx and CAM inefficiencies in a year, what number would you throw out? Thousands? Tens of thousands?

For some enterprise companies, the answer is hundreds of thousands or even millions! Many companies underestimate how much money is lost each year due to miscalculated common area maintenance expenses (CAM) and operating expenses (OpEx).

These inefficiencies must be addressed, and there are two ways to do it:

• Learn as much as possible about the task at hand to make sure you address it in the right way.
• Make sure you are using the best and most efficient tool for the job.

For retail tenants managing dozens or hundreds of leases, tracking operating expense reconciliation and CAM charges accurately is critical to controlling occupancy costs.

"The best practice is to stay on top of OpEx reconciliations and audits all along."

Matt Waters, CPA

Director of Lease Accounting & Sustainability, CoStar Real

Matt Waters, CPA

What are OpEx and CAM Expenses in Commercial Real Estate?

One of the most intricate areas of lease administration and accounting involves operating expenses (OpEx) and common area maintenance expenses (CAM). Let’s start with key definitions and terms associated with both, then explore how software can help reduce associated waste and inefficiency by automating CAM and OpEx reconciliation.

Common Area Maintenance (CAM) Expenses and Fees

CAM expenses (Common Area Maintenance expenses) are costs charged by landlords to maintain shared spaces within a commercial property. These areas may include:

• Parking lots
• Landscaping and outdoor maintenance
• Security services
• Snow removal
• Lighting in shared areas
• Cleaning of common spaces

CAM fees are typically distributed among tenants based on their pro rata share of the property’s square footage.

For retail properties such as shopping centers or malls, CAM expenses are often one of the largest components of operating costs beyond rent.

Operating Expenses (OpEx) in Real Estate

OpEx, or operating expenses in real estate, refers to the costs required to operate and maintain a commercial property outside of base rent. These OpEx expenses are typically shared between tenants through lease agreements and may include:

• Property taxes
• Insurance
• Utilities
• Maintenance and repairs
• Property management fees
• Common area maintenance (CAM)

Because CAM expenses are a subset of OpEx, they are often grouped together when tenants review operating expense statements.

Additional Terms to Know

Pro Rata Share is the term used to describe each tenant’s portion of OpEx. This is generally based on the square footage each tenant occupies relative to the whole property.

Expense Pool is used to describe the total amount of OpEx that the landlord accumulates over a set period. This total is generally then allocated to tenants based on their pro rata share.

Gross Up might be allowed per the lease contract; in which case the landlord is allowed to add a percentage to the tenant’s pro rata share.

Admin Fees might be allowed per the lease contract; in which case the landlord is allowed to add a fee to the tenant’s pro rata share.

Base Year is a year that other expenses are compared to for the purpose of putting a cap on how much OpEx can increase year over year and over time.

Percentage Cap sets the maximum amount that can be charged for each year by applying a percentage to the prior year’s amount.

Cumulative Cap sets a maximum amount that can be charged for each year by applying a percentage to the base year and then each subsequent year. This may be represented in a lease table exhibit.

Escrowed Charges are paid throughout the year to the landlord from the tenant and represent estimated OpEx. The estimate might be based on last year’s actual charges or another agreed-upon method.

Reconciliation typically occurs on an annual basis and involves comparing the escrowed charges to the pro rata share resulting in an additional amount due the landlord or a refund.

Audit is an action that can be taken by the tenant under some leases. An audit involves reviewing landlord records to understand the total expense pool, pro rata share and gross-up or admin charges.

Notice Dates are important for both the tenant and the landlord because each lease may have specific time limits on when statements, charges, reconciliations, or audit requests are due.

There are many moving pieces associated with OpEx, and unfortunately, each lease can be different. Tenants forfeit millions of dollars each year by relying solely on landlord invoices. I know this because there are entire consulting practices built around recovering this money from landlords. 

Engaging with one of these consultants is a good idea especially if it has been a while since your company took a deep dive into OpEx.

Make CAM and OpEx easier to manage

Automate the work with CoStar Real Estate Manager

Make CAM and OpEx easier to manage

Why CAM Expenses Matter for Retail Tenants

Retail lease structures often rely heavily on CAM expense allocations, especially in shopping centers, lifestyle centers, and mixed-use retail developments.

Retail tenants typically share responsibility for maintaining common areas such as:

• Parking lots
• Walkways and entrances
• Public restrooms
• Signage and lighting
• Landscaping and outdoor seating areas

Because these spaces directly influence customer experience, CAM costs can represent a significant portion of a retailer’s total occupancy costs.

For large retail portfolios, even small discrepancies in CAM calculations can create substantial financial risk.

Best Practices for Accurate Operating Expense Reconciliation

The most accurate operating expense reconciliation process is proactive — not a once-a-year scramble. Retail portfolios in particular benefit from a consistent workflow that reduces errors, shortens review cycles, and improves recovery outcomes.

Use these best practices to keep reconciliations accurate and efficient:

• Standardize your intake. Require landlord statements, backup documentation, and GL-level detail in a consistent format so your team isn’t rebuilding the same analysis every time.
• Validate the expense pool before you allocate it. Confirm that charges align with lease-defined categories, remove obvious non-recoverables, and flag unusual spikes (especially in repairs, maintenance, and admin fees).
• Confirm your pro rata share assumptions. Recalculate square footage allocations when tenants change, spaces are remeasured, or the landlord uses a different rentable area basis than your lease language supports.
• Apply caps, base year logic, and gross-ups consistently. These provisions are common in retail leases, but they’re also a frequent source of mistakes when applied manually across many locations.
• Reconcile escrowed charges line-by-line. Compare estimated payments to actuals and document the variance driver (timing, classification, allocation, or true cost changes).
• Track notice dates and audit windows. Missing deadlines can eliminate recovery leverage even when errors are clear — especially when you’re working across dozens of leases.

See OpEx and CAM Expense Savings with Software Built for Efficiency

When teams rely on spreadsheets and email threads to manage these steps, the process becomes slower and more error-prone as the portfolio grows. That’s why many organizations move to lease management software to automate calculations, standardize data collection, and surface exceptions faster.

Advanced lease accounting solutions like CoStar Real Estate Manager provide tools designed specifically for CAM expense management and operating expense reconciliation. The OpEx audit tool can track or calculate all the key data points discussed in this article and more on a lease-by-lease basis. On top of that, CoStar REM makes it easy to get information in and out with validated upload templates, standard industry-leading reports and ad-hoc reporting capabilities.

With CoStar Real Estate Manager, teams can:

• Track CAM and OpEx expenses across every lease
• Automate reconciliation calculations
• Monitor pro rata allocations and expense pools
• Identify discrepancies in landlord invoices
• Generate standardized reconciliation reports

This visibility helps enterprise organizations ensure they are paying only the CAM fees and operating expenses required by their lease agreements. This makes a particularly important difference to retail lease administration.

So make sure your lease management platform has the features and functionality you need to address these pesky and costly inefficiencies, reducing risk and controlling occupancy costs across your entire portfolio.