A tenant's pro rata share is the fraction of a property's shared costs it pays: the tenant's rentable area divided by the property's rentable area. A 10,000 square foot tenant in a 200,000 square foot building has a 5% share. The lease decides the denominator, gross-up, and which costs apply.
Nearly every cost that passes from landlord to tenant passes through a pro rata share. It looks like simple arithmetic and in practice it is the most negotiated fraction in a commercial lease.
The formula and its variables
Share = tenant's rentable area divided by the denominator the lease defines.
| Variable | Common choices | Effect |
|---|---|---|
| Numerator | Tenant's rentable area, as measured under a standard such as BOMA's | Remeasurement changes the share |
| Denominator | Total rentable area; leased area; area of a defined centre; excluding anchors or pads | The single largest driver of the result |
| Gross-up | Variable costs restated at 95% or 100% occupancy | Raises the bill in a partly vacant building |
| Caps | Limits on increases in controllable costs | Reduces the bill in high-inflation years |
| Cost pools | Separate shares for CAM, taxes, insurance, floor costs | Several shares per lease |
Where it goes wrong
A remeasured building whose leases still carry the old numerator. A denominator that shifted when a pad was sold or an anchor was carved out of the centre. A share copied into the abstract as a percentage with no record of the areas behind it, so nobody can recalculate it. Each of these becomes a finding in a tenant's CAM audit, and each is a lease administration record rather than an accounting one. The CAM reconciliation guide sets out how the share flows into the annual statement.
What the abstract should hold
The tenant's area and its measurement standard, the denominator definition and its current value, gross-up language, caps, and each separate cost pool with its own share. With those fields, the rentable versus usable question and the load factor can be answered from the record instead of the lease PDF.
Related terms
Frequently asked questions
What is the denominator in a pro rata share?
Whatever the lease says: total rentable area of the building, leased area, or the area of a defined portion such as a retail centre excluding anchors. The choice changes the share materially. A denominator of leased rather than total area raises every remaining tenant's share when the building has vacancy.
How does gross-up affect the share?
Gross-up adjusts variable costs to a stated occupancy level, often 95% or 100%, so that tenants pay as if the building were full. It is applied to the costs, not the share, but has the same effect on the bill. Leases specify whether and how it applies, and it is a frequent audit point.
Can a tenant have different shares for different costs?
Yes. Retail leases often set one share for common area maintenance measured against the centre, another for taxes measured against the parcel, and exclude anchors from some denominators. Office leases may set a floor share for floor-specific costs. Each share is a separate field in the abstract.