Costs
4 lease clauses that decide CAM charges and TI allowances in Denver
Commercial real estate and workspaces in Denver: four lease clauses set your true occupancy cost per square foot, from CAM and base year to TI allowances.
What to take away
- In commercial real estate and workspaces, four clauses decide your true Denver occupancy cost per square foot: CAM charges and base year, tenant improvement allowance, escalation clause, and repair and replacement obligation.
- CAM charges pass through operating expenses; the base year fixes the floor, and the reconciliation can swing your cost by dollars per square foot.
- The tenant improvement allowance is not free moneyhow and when it is disbursed decides your cash flow during buildout.
- Escalations run either as a fixed percentage or as CPI, and the choice compounds over a five or ten year term.
- A repair and replacement clause can shift roof, HVAC or structural costs to you, even in a net lease.
- Read all four together before you sign, because headline rent is only part of the Denver office market story.
Why four clauses, not the headline rent, set Denver occupancy cost
Denver's office inventory spreads across downtown, the Denver Tech Center, Boulder Turnpike corridors and the northwest suburbs, and each submarket carries its own operating expense load. A landlord in LoDo quotes rent per square foot that looks reasonable. The quoted number is rarely what you pay. Operating expenses, buildout money and annual increases move the real figure.
The gap between quoted rent vs actual rent is where most first-time tenants lose budget control. A lease at one rate with a weak CAM clause can cost more than a lease at a higher rate with tight language.
Public real estate companies disclose lease obligations in their SEC filings, which shows how material these clauses are. You can review those disclosures yourself through SEC.gov | Search Filings for landlords active in Denver.
The four clauses below are the ones that decide your occupancy cost per square foot. Each one is negotiable, and each one has a market norm you can test against.
Clause one: CAM charges, the base year and what stays excluded
CAM charges cover common area maintenance: lobby cleaning, snow removal, landscaping, security, parking lot repair and management fees. In a multi-tenant Denver building, these are pooled and divided by your share of rentable area.
CAM items: included vs excluded
Typically included
- Snow removal and landscaping
- Yes
- Lobby and common area cleaning
- Yes
- Landlord income taxes
- No
- Mortgage interest
- No
- Leasing commissions
- No
- Capital improvements
- No
Typically excluded
- Snow removal and landscaping
- No
- Lobby and common area cleaning
- No
- Landlord income taxes
- Yes
- Mortgage interest
- Yes
- Leasing commissions
- Yes
- Capital improvements
- Yes
The base year is the reference point. If your lease is a base year stop, you pay only the increase in CAM over that year's actual cost. If it is a base year with a cap, your exposure is limited to a set percentage per year.
Watch the exclusions. Landlord income taxes, mortgage interest, leasing commissions, capital improvements and costs to fix landlord negligence should stay out of CAM. A broad CAM definition with no exclusions is where budgets break.
Reconciliation comes once a year, and it can produce a bill or a credit. Ask for an audit right and a deadline for landlord records. For the wider distinction between payment structures, see net lease versus gross lease.
The legal definition of common area maintenance and related terms is set out in Wex | Wex | US Law | LII / Legal Information Institute.
CAM charges and base year
| CAM item | Typically included | Typically excluded |
|---|---|---|
| Snow removal and landscaping | Yes | No |
| Lobby and common area cleaning | Yes | No |
| Landlord income taxes | No | Yes |
| Mortgage interest | No | Yes |
| Leasing commissions | No | Yes |
| Roof replacement | Sometimes, if amortized | Often excluded |
Clause two: the tenant improvement allowance and when it is disbursed
The tenant improvement allowance is money the landlord contributes to your buildout. It is quoted as dollars per square foot, and it is tied to the term, the credit of the tenant and the condition of the space.
TI allowance exposure by disbursement
- 225,000total allowance, 5,000 sq ft at 45
- 4 monthsbuildout time you carry full cost
- 50%draw at framing cuts exposure
- 50%draw at completion
Disbursement is the part tenants miss. Some landlords pay on completion, some reimburse after lien waivers and invoices, and some pay in progress draws. A reimbursement model means you fund the whole buildout first.
Timing matters more than the headline number. A larger allowance paid after move-in can cost you more in financing than a smaller allowance paid in draws. Ask for a draw schedule tied to construction milestones.
Unused allowance usually does not convert to free rent. It may be forfeited, or it may offset rent only if the lease says so. Get that in writing. For the cost side of the buildout, see the commercial leasing checklist.
A 5,000 square foot Denver office at a 45 dollar allowance equals 225,000 dollars. If the landlord reimburses at completion and your buildout takes four months, you carry that 225,000 dollars yourself until the check clears.
A draw schedule of 50 percent at framing and 50 percent at completion cuts that exposure roughly in half.
Clause three: escalations, fixed percentage against CPI
Escalations raise your rent each year. The two common forms are a fixed percentage and a CPI adjustment. A fixed percentage is predictable: you know the number on day one and can model it.
Fixed vs CPI escalation over five years
Fixed 3 percent
- Year 1
- 3 percent
- Five-year compounded
- 16 percent
- Predictability
- High
- Collar option
- Not needed
CPI averaging 5 percent
- Year 1
- 5 percent
- Five-year compounded
- 28 percent
- Predictability
- Low
- Collar option
- 2 percent floor, 5 percent ceiling
CPI is variable. Denver sits in the Mountain region that the Bureau of Labor Statistics prices separately from the coasts, and regional inflation has moved sharply in recent years. A CPI clause with no floor and no ceiling can outrun a fixed percentage quickly. A collar, say 2 percent floor and 5 percent ceiling, limits both sides.
Compare the two over the full term, not year one. A 3 percent fixed escalation compounds to roughly 16 percent over five years. A CPI clause averaging 5 percent compounds to about 28 percent over the same period.
The structure also appears in retail leases, and the tradeoffs are similar. See escalation clause for how fixed and CPI terms compare.
Clause four: repair and replacement obligations that land on the tenant
The repair and replacement obligation decides who pays for the big systems: roof, structure, HVAC, plumbing and electrical. In a net lease, tenants often take interior systems while the landlord keeps the roof and structure.
Who pays for repairs and replacements?
Does the clause say repair, replace, or maintain?
tenant may owe roof or HVAC replacement
landlord keeps capital replacements
The words to watch are repair, replace and maintain. A clause that requires you to replace a roof or an HVAC unit can add six figures over a term. Push for a landlord obligation on capital replacements, with amortization of the cost over the useful life.
Denver runs a dry, high altitude climate with wide day to night temperature swings, and local service contracts for rooftop units typically include spring and fall inspections. If you accept an HVAC service obligation, cap your exposure and require landlord approval on major replacements.
Environmental and code compliance is another line item. Denver and Colorado adopt building and energy codes through the state and city process, and a code upgrade can require work mid-term. The lease should say who pays. Silence usually favors the landlord.
Reading the four together as one occupancy cost per square foot
Add the pieces: base rent, your share of CAM above the base year, the amortized value of the tenant improvement allowance, and the escalation path. That total is your occupancy cost per square foot.
Lease review checklist
- CAM definition with clear exclusions and a cap
- Base year stated, with audit rights and deadline
- TI allowance amount, draw schedule, unused funds
- Escalation type, with a collar if CPI applies
- Repair and replacement split, including roof and HVAC
- Occupancy cost per square foot modeled over full term
Run the numbers for the full term, not the first year. A low rent with uncapped CAM and CPI escalation can beat a higher rent with a fixed escalation and a generous allowance.
Use a checklist before you sign:
- CAM definition with clear exclusions and a cap
- Base year stated, with audit rights and a records deadline
- Tenant improvement allowance amount, draw schedule and unused funds treatment
- Escalation type, with a collar if CPI applies
- Repair and replacement split, including roof, structure and HVAC
- Occupancy cost per square foot modeled over the full term
Public companies disclose lease obligations under SEC rules, and the guidance is available through SEC.gov | Regulation S-K.
Denver leases differ by submarket, so compare offers from downtown, the Denver Tech Center and the northwest corridor on the same occupancy cost basis. See the commercial leasing rules 2027 for how to line up offers on equal footing.
