The percentage of a building's total rentable area that is currently leased and occupied. Occupancy rate matters for CAM because it affects how expenses are distributed, whether gross-up provisions apply, and whether vacant space costs are shifted to existing tenants.
Occupancy rate equals occupied rentable square footage divided by total rentable square footage, expressed as a percentage. In CAM contexts, occupancy rate triggers gross-up clauses: when occupancy falls below a threshold (often 95%), variable expenses are adjusted upward to simulate full occupancy. This prevents existing tenants from absorbing the full cost of maintaining vacant space while also preventing landlords from profiting from the adjustment.
A building at 70% occupancy applies gross-up to all expenses, not just variable ones. Fixed costs like property taxes and insurance get inflated to a hypothetical 95% occupancy level, even though those costs do not decrease with vacancy. Tenants pay more than the actual expense.
Ask your landlord for the current occupancy rate and verify which expenses are subject to gross-up. Fixed expenses (taxes, insurance, base management fees) should not be grossed up because they do not vary with occupancy.
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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.
