A CAM gross-up adjusts a building's variable operating expenses to what they would have been at a stated occupancy level, usually 95% or 100%, before those expenses are allocated to tenants. It applies only to costs that rise and fall with occupancy. The formula is actual variable expense × (gross-up occupancy ÷ actual occupancy). Fixed costs like property tax and insurance are never grossed up.

The clause exists because vacancy does two unfair things at once. In a half-empty building, the tenants who are there pay less than their true share of variable costs, and the landlord absorbs the rest. The gross-up puts both back where they'd be in a full building. Here is the calculation, done properly, with the errors that get landlords audited.

Why a gross-up clause exists

Picture a 100,000 sf office building that is 60% occupied. Janitorial, utilities and trash removal are running at $400,000 a year, but that's the cost of cleaning and powering 60,000 sf of tenant space, not 100,000. Without a gross-up, the pool is divided by the whole building. A 10,000 sf tenant pays a tenth of $400,000, which is $40,000, for services that actually cost $66,667 to deliver to their space. The landlord eats the difference across every vacant floor.

Now flip it. If the building fills to 95% next year, the same tenant's share jumps, not because they used more, but because the denominator stopped hiding the vacancy. Tenants with a base year set during a vacant period get hit hardest, because their base year was artificially low.

The gross-up fixes both problems by calculating variable expenses as if the building were 95% full every year. In a full building it changes nothing. In an empty one it changes a lot.

Step 1: Separate variable expenses from fixed

This is the step most gross-up errors come from. Only expenses that vary with occupancy are grossed up. Everything else stays at actual.

The lease clause usually says "expenses that vary with occupancy" and leaves the list to the landlord. Write the list down once, per building, and apply it every year. Changing which lines are variable from year to year is the fastest way to lose a tenant audit.

Step 2: The formula

Grossed-up variable expense = actual variable expense × (target occupancy ÷ actual occupancy)

Target occupancy is whatever the lease says: 95% is most common, 100% is used in some markets. Actual occupancy should be measured the way the lease defines it, which is normally leased square footage as a percentage of rentable area, averaged across the year. Use occupied instead of leased, or year-end instead of average, and you've changed the answer.

Cap the result. If the building is 97% occupied and the target is 95%, you don't gross down. Most clauses say "if actual occupancy is less than 95%", and that's the reading to apply.

Step 3: Worked example — a 60%-occupied building grossed up to 95%

Building: 100,000 sf rentable, 60,000 sf leased (60% average occupancy). Lease gross-up target: 95%.
Tenant: 10,000 sf, pro-rata share 10%.

The variable multiplier is 95 ÷ 60 = 1.5833. Every variable line is multiplied by it; every fixed line is left alone.

Per square foot: $1,233,333 ÷ 100,000 sf = $12.33/sf (versus $10.00/sf without the gross-up).

Tenant's bill: 10,000 sf × $12.33 = $123,333 (versus $100,000 without the gross-up).

Now the part that makes the clause fair rather than a landlord windfall. Look at what the landlord actually recovers:

The landlord still absorbs $260,000. That's the vacant space's share of the fixed costs ($240,000) plus the 5% the gross-up target leaves unrecovered. What the gross-up removed was the $140,000 of variable cost the landlord was paying to service space nobody occupied. The tenant, meanwhile, is now paying $63,333 for variable services that cost $66,667 to deliver to their 10,000 sf. Close to fair; slightly in the tenant's favour because of the 95% target.

Step 4: Worked example — the base year has to be grossed up too

Here's the version that produces disputes. Same tenant, but their lease has a base year: they pay only the increase in CAM over the base year figure.

Suppose the base year was 2024, when the building was 90% occupied and total expenses were $1,100,000 with $520,000 of that variable. Two ways to set the base:

If you gross up the comparison year and not the base year, the tenant pays $2,889 more than the clause intends, and a competent tenant auditor will find it in about ten minutes. The rule is symmetry: whatever occupancy adjustment you apply to the current year, apply to the base year, using the same variable-expense list.

Step 5: Where caps and exclusions come in

Gross-ups run before caps. If the tenant's lease caps controllable expenses at 5% growth per year, you gross up first, then test the grossed-up controllable total against the cap. Running the cap first and grossing up afterwards inflates the bill past what the cap allows.

Exclusions run before everything. Capital items, leasing commissions, tenant-specific improvements and landlord overhead come out of the pool before you classify what's left as fixed or variable. A grossed-up capital item is a double error.

The gross-up also has to sit inside the annual reconciliation timeline. If you're running the process described in our guide to the annual CAM reconciliation, the gross-up is a worksheet step between "close the expense ledger" and "calculate each tenant's share", and it should be visible to the tenant in the reconciliation statement, not buried in the total.

Common gross-up errors that trigger audits

• Grossing up fixed costs. Property tax doesn't fall when a floor is empty. Grossing up the whole pool is the most common error and the easiest to spot.

• Using the wrong occupancy figure. Year-end occupancy instead of the annual average, or occupied instead of leased, or gross area instead of rentable. Pick the lease's definition and document it.

• Grossing up the current year but not the base year. Step 4 above. This is where most base-year disputes come from.

• Grossing the management fee twice. If the fee is 3% of collected revenue, it already rises with occupancy. Treating it as variable and multiplying again overstates it.

• Changing the variable list year to year. Tenants compare statements. A line that was fixed in 2024 and variable in 2025 needs an explanation you'd be comfortable giving under audit.

• No visibility in the statement. A reconciliation that shows only the grossed-up total invites the question "what did you do to these numbers?" Show actual, multiplier, and grossed-up figures line by line. It ends most CAM disputes before they start.

Setting up gross-up logic in NetSuite

If the CAM reconciliation runs inside a property management system on NetSuite, the gross-up is configuration rather than a spreadsheet: each expense account is tagged fixed or variable once per building, the lease record holds the gross-up target and the occupancy definition, and the reconciliation routine reads average leased occupancy from the lease data for the period. The multiplier is applied only to variable-tagged accounts, the base year is stored with its own grossed-up value, and the tenant statement shows the three columns (actual, multiplier, grossed-up) automatically.

That's the approach in RIOO's CAM reconciliation on NetSuite. Whatever tool you use, the test is simple: change the building's occupancy from 60% to 95% and confirm that only the variable lines move. If the tax line changes, the setup is wrong.

Frequently asked questions

Q1. What is a CAM gross-up?
A CAM gross-up adjusts a building's variable operating expenses to the level they would reach at a stated occupancy, usually 95%, before those expenses are allocated to tenants. It applies only to costs that change with occupancy, such as janitorial and tenant utilities.

Q2. Which expenses can be grossed up?
Only variable expenses: janitorial, tenant-area utilities, trash removal, consumable supplies and similar costs that rise and fall with the number of occupied square feet. Property tax, insurance, landscaping and fixed service contracts are not grossed up.

Q3. How do you calculate a gross-up?
Multiply the actual variable expense by the gross-up target divided by actual average occupancy. At 60% occupancy with a 95% target, the multiplier is 95 ÷ 60 = 1.5833. Fixed expenses are added back at their actual amount.

Q4. Does a gross-up increase what tenants pay?
In a partially vacant building, yes, because it removes the vacancy discount tenants were receiving on variable services. In a full building it has no effect. It brings the tenant's variable cost share back to roughly what the services cost to deliver to their space.

Q5. Does the base year need to be grossed up?
Yes. If the current year is grossed up and the base year is not, the tenant is charged for an occupancy difference rather than a cost increase. Apply the same gross-up method and the same variable-expense list to both years.

Related reading

• How to run annual CAM reconciliation: process, timelines and dispute handling
• How to manage CAM reconciliation disputes
• NetSuite CAM reconciliation automation