The short answer is usually no. Most New York office leases quote a base rent, and some or all of the building’s running costs are charged on top of it. What’s included depends on the type of lease, so the quoted rent per square foot is only the starting point.
Are utilities included?
Utilities are almost always an additional expense, separate from base rent. That covers electricity, heating, air conditioning and water, and sometimes internet and phone service.
How they’re charged varies by building. Some landlords bill each tenant for actual usage, measured by its own meter. Others allocate costs with a formula based on the size of your space and the building’s overall usage.
Gross vs. net leases
The lease structure decides how much of the building’s operating cost sits inside your rent. A gross lease typically includes base rent plus some or all of the building’s operating expenses, such as property taxes, insurance and common area maintenance. Even then, utilities are often billed separately.
A net lease usually has a lower base rent, but the tenant pays a share of operating expenses on top of it. Each level adds a cost: property taxes in a single net lease, insurance in a double net lease, and maintenance in a triple net (NNN) lease. Under any net lease, utilities are almost always the tenant’s. A lower base rent doesn’t guarantee a lower total cost, so add everything up.
| Gross | Net | |
|---|---|---|
| Base rent | Included | Included, usually lower |
| Operating costs | Some or all included | More passed through to the tenant |
| Utilities | Often billed separately | Usually billed separately |
| Real estate taxes | Depends on the lease | Often the tenant’s share |
Every lease defines these differently. Read the operating expense and tax clauses before comparing.
What CAM charges cover
Common area maintenance, or CAM, covers the cost of running the shared parts of a building: hallways, lobbies, elevators and shared restrooms, along with cleaning, repairs and security. It’s usually passed to tenants in proportion to the size of their space. Depending on the lease, tenants may also pay a share of property taxes and insurance.
Charges that can apply under any lease
Even a gross lease can carry costs beyond the rent. Look for these clauses:
- Pass-throughs. Some leases let the landlord pass on increases in property taxes or insurance premiums.
- After-hours bill-backs. Use of systems such as HVAC outside standard hours may be billed back to you.
- Partial utility coverage. A lease may include some utilities and not others: the landlord covers water, say, while you pay for electricity and gas.
Common costs to ask about
- Electricity
- Cleaning
- HVAC, including overtime hours
- Real estate taxes
- Operating expenses
- Freight and after-hours access
- Internet
How to keep the costs in check
- Ask for a detailed breakdown of operating expenses and CAM charges before you sign. It shows what you’re paying for and where charges can be challenged.
- Estimate utilities from real data. Many landlords can provide historical usage for the space. Compare it with how your team actually uses energy, and get any verbal answers confirmed in writing.
- Negotiate a cap on CAM increases to protect your budget from unexpected jumps later in the term.
- Discuss energy-efficient upgrades with the landlord. They can lower utility costs over the life of the lease.