Expert: Jim Avancena, CPM - 3/24/2009

Question
Jim,

I am interested in knowing in the Seattle area, what are the typical CAM charge line items that commercial property owners use when building the CAM charge anuual budgets.

What percentage of leases have a maximum cap on CAM charges?

How does a building owner | property manager come to an appropriate determination for preperty management fee, on a building that is not yet fully leased (where total gross rents or income is not yet determined).

Is there a source in the Seattle area for accessing what the going rate is for leasable space in "new construction", for "mini sub markets" like Shoreline, and dealing with the debate of paying T.I.$ (how much) vs. build out and what should be included and how much to negotiate to recapture those fixed expenses during the first 5 year term?

Answer
Marcia-

I admire your straight forward, confident style of finding the information you need and then moving forward based on that information.

Please allow me to give you some preliminary information.

Every office and retail leasing market & submarket in this country has its own unique detailed answers to many of your questions.  Perhaps 50% of the response would be similar, but the unique aspects of each submarket is where you find the real value.  

You should consider contracting with an experienced Seattle area retail broker that will know all the specific answers to your questions; and more importantly, they will know the answers to the questions that you do not yet know to ask yet that will come up as you move further into the leasing process.  In most every market in the country, the owner of the shopping center, mall, etc. pays your agents share of the commission.

You should call several agencies in your area and interview several agents.  You will know who is really interested in helping you and take the appropriate amount of time to patiently educate you about the process.   Your common sense will allow you to pick a well suited agent.  Contract with NO ONE that suggests that you should pay them a fee.

A property management fee is based on several things.  

First, the number and quality of the management services listed as being provided to the property owner in the management contract.

Second, the great majority of management contracts are compensated by using a percentage of the total income collected each month by the property management company.  Commonly, if the entire project has not be fully leased yet, the contract will specify a specific monthly fee that the landlord will pay the management firm until the project becomes a certain percentage leased up; for example 70% leased.  Thereafter the fee then is based on the percentage of the total income collected.  

Third and last, the fee is based on the quality of the management company's services and reputation.  There is probably a fairly standard percentage for management services in your area.  Try calling the local board of realtors to get that information.

All your questions about finding "a source" the "going rate" for leasable space in new construction, and in specific "mini submarkets", as well as what TI's should be a specific market, etc., to be of any value, all must come from an agent that specializes in the market area that interests you.  Just as his answers will be different for Seattle and Spokane, they will be equally distinct between local submarket areas.  The smaller the area that the agent specializes in, the greater the value his information will be to you.

You may consider asking other retail tenants that are approximately your size, or sell similar products, etc. to tell you who they used to discover all of this information and see what their response is.

Finally, keep in mind the time sequence of the information you find about the retail market. I suggest that much of the details you are provided will need to be adjusted to adapt to the dramatic recessionary changes in the retail market in recent months.

Several of your questions ask for sophisticated information that is not commonly articulated by non-real estate oriented retail industry people.   The level of a few of your questions makes me curious; i.e., they suggest that whoever assisted you in preparing your questions might be a good person to rely upon to track down the information you seek.

You should be able to garner good lease terms now, provided you have excellent credit.  Good luck in accumulating your data.

-Jim