Why Commercial Rent Can Vary Between Spaces in the Same Building

If you've ever searched for or rented a commercial space, or read one of our most popular posts - Commercial Rent Explained - you already know how complicated commercial rent can be to break down. Base rent, CAM, taxes, and other costs can all affect what a tenant actually pays each month. But the most common question asked is:

"Why is this space more expensive than the other one?"

We get this question all the time from both landlords and tenants, especially when the spaces are in the same building or the same group of buildings. But even when a business space for rent shares the same address as another. Rent can vary between the two depending on what the tenant is actually getting.

Space 1

Space 2

Example: Space 1 and Space 2 at Waimea Office Center

Same Building/Property Doesn't Mean Same Space

Here's an example from a property we manage. Space 1 (384 SF) was recently renovated and was advertised at $0.75/SF, less than Space 2. That's partly because smaller spaces often lease at higher rates per square foot; they're more affordable for small businesses and are in high demand. CAM works differently: it's based on the amount of property each unit occupies. Space 1 pays 3.82% of the property's total CAM because it occupies more space, while Space 2 pays 1.7% of CAM because it occupies less space. A larger unit may have a lower base rent but a higher CAM share, while a smaller unit may cost more per square foot but have lower operating expenses.

The example above is from a building with pretty consistent use and layout (primarily office and medical office suites). But in many other properties (especially industrial and flex), you'll often see a wider mix of space types, like:

• A finished office with multiple rooms, windows, and a private restroom

• A warehouse with power and plumbing already set up

• A wide-open shell space that's basically just four walls and concrete

Even if the square footage is the same, these spaces are not equal in terms of value, function, or cost.

A Big Part of Commercial Rent Is "How Ready Is It?"

A move-in-ready space that's already built out usually rents for more because it already has things like:

• walls and rooms already framed out

• flooring and lighting installed

• restrooms in place

• finishes that feel clean and professional

On the other hand, a lower-rent space usually means the tenant will need to do more work (and spend more money) to get it into the shape they want. Or they may accept the unit in as-is condition and pay a lower rate. Some tenants only need a "shell" (four walls and electricity) for something like an office, while a coffee shop would need major upgrades like a hood, refrigeration, and upgraded electrical. It all depends on the intended use.

It's also important to remember that tenant improvements are often negotiable with a landlord. And if the build-out is going to take time before the space is actually usable, tenants may also negotiate for free rent during construction (often called rent abatement) so they're not paying full rent before they can open and generate income.

Other factors that can affect rent include:

• plumbing inside the walls

• upgraded electrical capacity

• floor drains

• venting or specialty systems

• number of dedicated parking spaces

• location on the property

  
  

If a space already has what a tenant needs, it can save considerable money and time, and that's usually reflected in the rent.

Seemingly Affordable Rent Can Get Expensive Fast

This is where people get surprised. A more affordable space might seem like a win until you realize it requires permits, construction, and the associated costs.

Sometimes paying a little more for a space that's ready to go allows you to open sooner and avoid major upfront expenses. The key is to do your due diligence and decide what works best for your business: paying more over time for a move-in-ready space, or investing the time and energy upfront.

Why CAM Might Be Different

CAM is another area that can cause confusion. Unlike rent, CAM isn't income for the landlord; it's designed to cover shared operating expenses for the property, such as:

• Parking lot maintenance

• Landscaping

• Exterior lighting

• Common area cleaning

• Property management and upkeep

• Trash removal

  
  

CAM is typically based on how much space you take up on the property, so in most cases, more square footage means a larger share of CAM. It's also usually estimated at the beginning of the year and then reconciled later. If the property spends less than expected, tenants may receive a credit. If costs run higher, tenants may owe a little more. That's normal, and it's why good property management matters. The goal is to keep CAM fair, accurate, and transparent. At BICP, we plan to provide the best possible CAM estimates for both tenants and landlords, and we implement updated CAM numbers at the start of the new year.

If you have questions about commercial rent, CAM, or lease terms in Hawaii, we're here to help. We're happy to walk through the numbers so you can compare spaces and understand your actual monthly cost.

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