by Arthur W. Putzel and Gilbert R. Trout

Keeping a shopping center or retail property properly maintained and in attractive physical condition takes diligent management and, of course, some capital investment.

Retail and commercial landlords typically pass all or most of their operation and maintenance costs monthly onto tenants in the form of common area maintenance, or CAM, costs. These costs can include upgrades or repairs to the facility, grounds or infrastructure maintenance and even holiday decorations.

Since CAM costs directly and indirectly affect a property owner’s bottom line, it is a mistake to not diligently track and manage these costs and reduce them in any way possible.

Many tenants, particularly the more savvy ones, negotiate to either exclude certain CAM costs from reimbursement, limit increases over time, or both, which takes money out of the owner’s pocket. Keeping CAM costs in line can help retain and attract quality tenants and improve the operation of a shopping center.

But it takes time, effort and expertise.

One area in which to seek operating cost savings is real estate tax bills. As property values and tax rates fluctuate, it is vital to review your bills regularly to be sure they are accurate and you are being taxed fairly.

There are often opportunities to reduce insurance costs that are overlooked by landlords. Examine the operations of a center and the current policies, and then work with the owner and their insurance broker to find areas where premiums can be reduced without compromising adequate coverage. Also determine areas of exposure.

Vendor relationships can also be leveraged to keep costs as low as possible, from bidding out snow removal and landscaping contracts to hiring contractors to repair roofs or parking lots.

Effectively overseeing common-area operations and CAM costs doesn’t just make good business sense. It shows a commitment to the retailers that lease space. In a challenging economy, that can go a long way towards retaining current clients — and keeping them in business — and attracting new ones.

Prospective tenants may initially shy away from a center offering space at a few dollars more per square foot than a similar property in the market. Often times, slightly higher rent combined with well-managed CAM costs results in a lower priced total package than the competition.

Retailers are quick to recognize the value these reduced costs bring to the deal.

This article was originally published in the Baltimore Business Journal.

About Trout Management
Trout Management manages thousands of square feet of retail space throughout the Mid-Atlantic. Their scope of work ranges from free-standing buildings and office space to large big-box retail centers.