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Costs, Fees, and Operating Expenses

Operating Expenses (OpEx)

The recurring costs required to operate and maintain a commercial property — taxes, insurance, CAM, and utilities — excluding debt service and capital expenditures.

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Home › Glossary › Costs, Fees, and Operating Expenses › Operating Expenses (OpEx)
Definition

Operating expenses (OpEx) are the recurring costs required to operate and maintain a commercial property, including property taxes, insurance, CAM, and utilities, but excluding debt service and capital expenditures. OpEx is the broader category that NOI is calculated against, subtracted from total property income to determine net operating performance.

OpEx in context of NOI and CAM

TermScope
Operating expenses (OpEx)All recurring property operating costs
CAMSubset of OpEx focused on shared area maintenance
NOIProperty income minus OpEx (excludes debt service, CapEx)

What to watch for before committing

Full expense category understanding

Recognize OpEx as the broader umbrella that includes CAM, taxes, and insurance together, not a synonym for any single cost.

Landlord vs tenant responsibility

Confirm which specific OpEx categories are tenant pass-throughs versus landlord-absorbed under your specific lease structure.

Historical OpEx trends

Request historical OpEx data when evaluating a property to understand cost trends and potential future increases.

OpEx ratio benchmarking

Compare a property's OpEx as a percentage of gross income against market benchmarks to assess whether costs seem reasonable.

Capital expenditure exclusion verification

Confirm capital expenditures are properly excluded from OpEx calculations, since they should be tracked separately.

Impact on NOI and valuation

Understand how OpEx directly affects NOI calculation and, by extension, property valuation if you're evaluating an investment purchase.

When you need to know this

  • Evaluating an investment purchase — calculating NOI and cap rate based on accurate OpEx figures
  • Budgeting occupancy cost as a tenant — understanding the full scope of costs beyond base rent
  • Comparing properties for investment or leasing — benchmarking OpEx ratios across candidate properties
  • Underwriting a sale-leaseback or acquisition — assessing a property's operating cost structure and trends

Frequently asked questions

What are operating expenses in commercial real estate? +
Operating expenses are the recurring costs required to operate and maintain a commercial property, including property taxes, insurance, CAM, and utilities, excluding debt service and capital expenditures.
How is OpEx different from CAM? +
OpEx is the broader category encompassing all recurring operating costs, including property taxes and insurance, while CAM specifically refers to costs associated with maintaining shared common areas — CAM is a subset of OpEx.
How does OpEx relate to NOI? +
Net operating income (NOI) is calculated by subtracting operating expenses from total property income, making OpEx a direct input into this key valuation metric.
Are capital expenditures included in OpEx? +
No, capital expenditures like a roof replacement are typically excluded from operating expenses and tracked separately, since OpEx is meant to capture recurring operational costs rather than infrequent large capital investments.

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