Retail Property Management/CAM fees

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Question
Hi Mike, my wife and I are thinking about purchasing a business and we have never negotiated a retail lease. The seller has a 4000 sq-ft free standing building in southern California with rent around $1.75 sq-ft($7000.00)which seems about right for the area and location. However, the seller says the CAM fees come to about $2000.00 (.50 cents a sq-ft) a month. That means the CAM cost is almost 30% of the rent charge. Does this seem right?  Put together, it equals $9,000 month for rent & CAM for a 4000 sq-ft free standing building in Riverside California. Is this too much to pay?

Answer
$.50/sf for NNN (CAM, taxes, and insurance) isn't that unusual for retail situations. I would ask to see a breakdown of the expenses so that you know what you would be paying for. Whether the rent is in line with market depends on location and amenities, and other various factors. And of course, you'll want to make sure your business is capable of supporting such an expense. Lastly, everything is negotiable, so you may be able to strike a better deal. Are you being represented by a broker?

Retail Property Management

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Mike Fortunato

Expertise

Can answer questions on all aspects of commercial real estate management, including lease administration, eviction issues, financial reporting and budgeting, asset valuation/enhancement, marketing & leasing, and site maintenance and repairs. 20+ years of real estate management.

Experience

25+ years in commercial management. Current own and operate property management company in southern California.

Organizations
BOMA and IREM

Education/Credentials
CPM (Certified Property Manager), RPA (Real Property Administrator)

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