commercial lease npv
Should CAM be included in lease NPV?
Should CAM be included in lease NPV?
Yes, if the tenant pays CAM. Those dollars are lease cash and belong on the same NPV walk as rent.
This page belongs to a validation / pilot concept. It is not generally available. Payment is not collected.
Questions this page also answers
Does every lease include CAM?
No. A full-service rent may already include it.
Where does a CAM cap go?
On the later years of the same walk.
Is CAM the same as occupancy cost?
CAM is one extra. Occupancy cost is the full stack.
Should tax sit here too?
If the tenant pays it, yes.
Plain-language definition
CAM is common-area cost the tenant often shares.
NPV only sees cash you write down.
A net rent sticker without CAM is not the bill.
Tax and insurance follow the same rule when the tenant pays them.
Gross leases already bake some extras into rent. Say so.
This page sits under Commercial lease NPV.
Need the next step? Open What is CAM?.
See What costs belong in NPV? when you want the nearby walk.
Open How CAM changes a comparison if this page is not the last step.
Investopedia defines net present value as later cash brought back to today. See Investopedia on NPV.
Why it matters
Leaving CAM off a net option makes it look cheaper than it is.
True-ups can move later years more than a rent step.
Brokers lose trust when extras appear after the rank.
A CFO will add them anyway.
How it works
- Ask who pays CAM on each option.
- Place the year-one estimate on the list.
- Grow it only if the lease says it grows.
- Honor a cap if one exists.
- Discount the extra with the rent.
Formula in words. NPV cash in a year = rent + CAM + other extras − credits.
| Input | Meaning |
|---|---|
| Start rent | First-year rent before extras |
| Extras | CAM, tax, or insurance the tenant still pays |
| Credits | Free rent or build-out money |
| Term | How many years the cash list runs |
| Discount rate | How hard later cash is shrunk |
Worked example
Here is a teaching sample. It is not customer data and not a result from a live client.
| Metric | Path A | Path B |
|---|---|---|
| Start rent | $36,000 | $33,480 |
| Year-1 extras | $14,000 | $14,980 |
| Year-1 credit | $5,000 | $2,750 |
| Sample NPV | $372,879 | $363,336 |
| Year | Rent | Extras | Credit | Cash out | Value today |
|---|---|---|---|---|---|
| Year 1 | $36,000 | $14,000 | $5,000 | $45,000 | $41,667 |
| Year 2 | $37,080 | $14,420 | $0 | $51,500 | $44,153 |
| Year 3 | $38,192 | $14,853 | $0 | $53,045 | $42,109 |
| Year 4 | $39,338 | $15,298 | $0 | $54,636 | $40,159 |
| Year 5 | $40,518 | $15,757 | $0 | $56,275 | $38,300 |
| Year 6 | $41,734 | $16,230 | $0 | $57,964 | $36,527 |
| Year 7 | $42,986 | $16,717 | $0 | $59,703 | $34,836 |
| Year 8 | $44,276 | $17,219 | $0 | $61,495 | $33,224 |
| Year 9 | $45,604 | $17,736 | $0 | $63,340 | $31,686 |
| Year 10 | $46,972 | $18,268 | $0 | $65,240 | $30,219 |
| Sample NPV | — | — | — | — | $372,879 |
Sample NPV for CAM-in-NPV sample is about $372,879. A second path lands near $363,336.
Year 1 of CAM-in-NPV sample has rent of $36,000.
Shared building cost is $14,000.
A credit of $5,000 lowers the cash you pay that year.
Cash out this year is about $45,000. Year one carries the CAM-in-NPV sample credit.
Later cash gets a shrink for time. At 8 percent, year 1 is worth about $41,667 today.
Next, year 2 rent is $37,080.
Assumptions
- The CAM-in-NPV sample uses one visible 8 percent rate.
- Credits hit in year one unless the page says otherwise.
- Both options share the same extra basis.
- No percentage rent sits in this teaching walk.
Edge cases
A mid-year start needs a stub period, not a fake full year.
A credit that pays later must move to that later year.
A cap on extras changes the later risk, not the first sticker.
Common mistakes
- Comparing a gross sticker to a net sticker.
- Using a CAM estimate as a cap.
- Putting CAM in year one only.
- Calling building insurance a surprise after the walk.
Decision implications
Yes, if the tenant pays CAM. Those dollars are lease cash and belong on the same NPV walk as rent.
If the gap is thin, show a second rate before anyone picks.
If one path wins only from a mistimed credit, rebuild the list.
This page answers one question. Nearby pages cover the next step.
See What is CAM? when you need that next step. Open What costs belong in NPV? for the nearby walk. Use How CAM changes a comparison if you want a second path.
Limits
- The number does not score daylight, transit, or floor plate.
- The number does not replace a legal read.
- Do not let one metric pick a space the team cannot use.
- Do not use this page as a clone of a nearby question.
U.S. BLS describes how brokers advise clients on property deals. See BLS broker occupation data.
Next step
This site is a validation / pilot concept. It is not generally available. Payment is not collected.
Ready for a bounded next step? Request Pilot Access or see how it works and compare commercial leases.
What is NPV in a commercial lease? · What discount rate should be used for commercial lease NPV? · When is NPV the wrong metric? · How is lease NPV calculated? · What costs belong in commercial lease NPV? · What is the difference between NPV and present value in a lease? · How should you explain lease NPV to a client? · Why use NPV when comparing commercial leases?
Trusted sources
These are public references. They are not endorsements and not client results.