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. Base rent, CAM, taxes, and other costs can all affect what a tenant actually pays each month. But the most common question we hear is:

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

We get this question frequently from both landlords and tenants. This is especially true when the spaces are in the same building or group of buildings. Even when a business space for rent shares the same address as another, rent can vary significantly. This variation depends 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 advertised at $0.75/SF, which is less than Space 2. Smaller spaces often lease at higher rates per square foot. They are more affordable for small businesses and are in high demand.

CAM works differently. It is 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. In contrast, 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. Meanwhile, a smaller unit may cost more per square foot but have lower operating expenses.

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

• 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 differ significantly in terms of value, function, or cost.

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

A move-in-ready space that is already built out usually rents for more. This is because it includes:

• Walls and rooms already framed out

• Flooring and lighting installed

• Restrooms in place

• Finishes that feel clean and professional

  
  

Conversely, a lower-rent space typically means the tenant will need to do more work and spend more money to get it into the desired shape. Some tenants may accept the unit in as-is condition and pay a lower rate. Others only need a "shell" (four walls and electricity) for something like an office. A coffee shop, however, 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. If the build-out takes time before the space is usable, tenants may negotiate for free rent during construction (often called rent abatement). This way, they aren't paying full rent before they can open and generate income.

Factors Affecting Rent

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. This is usually reflected in the rent.

Seemingly Affordable Rent Can Get Expensive Fast

This is where many people get surprised. A more affordable space might seem like a win until you realize it requires permits, construction, and 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. 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 can also cause confusion. Unlike rent, CAM isn't income for the landlord. It is 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. In most cases, more square footage means a larger share of CAM. It is usually estimated at the beginning of the year and reconciled later. If the property spends less than expected, tenants may receive a credit. If costs run higher, tenants may owe a little more. This is normal, and it's why good property management matters.

At Big Island Commercial Properties, we aim to provide the best possible CAM estimates for both tenants and landlords. 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.

Conclusion

Understanding commercial rent is crucial for making informed decisions. We know that navigating the complexities of commercial leases can be daunting. But with the right information and guidance, we can help you find the perfect space that meets your needs.

If you're ready to explore your options, don’t hesitate to reach out. Together, we can maximize your returns and support local businesses in West Hawaii.

CONTACT US