Commercial Property Management/Grossing up CAM electricity
Is there an industry standard among commercial building owners that when grossing up CAM, specifically electricity, to 95% occupancy that 20% of utilities is fixed and 80% is variable? I have worked in the real estate industry for over 20 years and have not heard of this standard. A national tenant claims it is standard procedure.
As you may know, a GROSS UP of expenses is a contrived calculation of the actual building operating costs to mathematically adjust and increase expenses to account for vacancy. The various components of the final gross calculation can be fairly determined but are very often manipulated and abused.
Electricity is only one of many component operating costs that a landlord combines with many other operating expenses to create a total figure the landlord uses to compute a tenants ratable share of the building costs. The component subtotal for electricity is adjusted based on each individual landlord's parochial reasons for adjustment. I am not aware of any "industry standard" of 20% fixed and 80% variable; my apologies to your "national tenant" contact that has told you this is so. Bull. What you need to know is the landlord's rationale for its 20 - 80 factoring. There are many justifiable reasons for various factoring figures, but very often the figures do not hold up to professional scrutiny.
I could argue both sides of the component values of any gross-up calculation for an extended amount of time. I hope that your landlord is not tying its fixed and variable factors based on 20% occupancy and 80% vacancy - that would be ridiculous - but tenants almost never know the questions it needs to ask to determine if the overall calculation is reasonable.
If you can get the landlord or its property manager to give you their rationale for the 20-80 figures for electricity and send me a follow-up I can tell you if the response seems fair.