Glossary / Lease terms and deal stages
Also known as: Proportionate share, tenant's share
Pro rata share is the percentage of a building's shared costs a tenant pays, usually its rentable square feet divided by the building's total rentable square feet. It sets how much CAM, tax, and operating expense pass-through the tenant owes as additional rent.
StrataFolio describes pro rata share as "a method of splitting costs between tenants in a particular building": divide the tenant's Rentable square feet (RSF) by the building's total rentable square feet and multiply by 100. A tenant with 5,000 square feet in a 25,000 square foot building has a 20% share.
Leases may adjust the calculation. Colliers explains that a gross-up clause lets a landlord calculate operating expenses as if the building were fully occupied, even when it is not, and StrataFolio describes gross-up provisions that assume a set occupancy level such as 95%.
Pro rata share drives the tenant's share of CAM charges, taxes, and expense increases over a Base year or Expense stop. Those amounts are additional rent. Whether additional rent counts toward your commission depends on your commission agreement; a Grubb & Ellis commission agreement, for example, based its fee on base rent and excluded operating expense increases.
Because pro rata share is usually based on rentable area, the building's measurement method and load factor affect it, which can matter when a tenant compares occupancy costs between buildings.
Check the denominator in the pro rata share definition, since it can change the tenant's costs even when the rent rate is the same.
For example, a hypothetical tenant leases 7,500 rentable square feet in a 60,000 rentable square foot building, a 12.5% share. If the building's property taxes are $400,000, the tenant's share is $50,000.
