The rate at which available commercial space is leased in a specific market over a given period. Absorption rate affects CAM because in buildings with slow absorption (high vacancy), the landlord may attempt to spread CAM costs over fewer tenants or apply gross-up provisions more aggressively.
Absorption rate measures the net change in occupied space over a defined period, typically expressed in square feet per quarter or per year. Positive absorption means more space was leased than vacated; negative absorption means vacancy increased. For CAM purposes, low absorption in a building increases each remaining tenant's share of fixed operating costs unless the lease contains a gross-up clause. Landlords in slow-absorption markets may be more aggressive about CAM pass-throughs to offset declining rental income.
A building experienced 40% vacancy due to slow absorption. The landlord did not gross up variable expenses as required by the lease, instead passing the full actual cost to the four remaining tenants. Each tenant's share of variable expenses was nearly double what it would have been at full occupancy.
Monitor your building's occupancy rate. If vacancy is rising, verify that your landlord is applying the gross-up provision in your lease correctly. Without gross-up, you may be subsidizing the cost of maintaining vacant space. If your lease has no gross-up clause, your CAM exposure increases as tenants leave.
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Find My OverchargesThis page provides general educational information. It is not legal advice and may not reflect the most current law in your state. Consult a licensed attorney for advice specific to your situation.
