Grossing Up Operating Expenses
Source: "Managing and Leasing Commercial Properties"
Published by IREM (copyright 2007)
"The office building industry has evolved the bill-back process to include the gross-up of expenses. The theory of the gross-up is to set the level of expenses at the full or near-full occupancy level and to even out the anomalies of the filling building, such as great swings in taxes, insurance, and variable operating expenses. This approach is said to benefit the property owner and the tenant and to be fair to each. In the case of a base-year lease, the gross-up is likely to benefit the tenant as well as the owner. In all other cases, however, the benefit of the gross-up belongs to the property owner."
Comments
Interesting information. I would have thought that grossing up would only benefit the owner, never the tenant.
Excellent explanation of grossing up operating expenses. This is a must have for all commercial managers.
- Christopher Mellen | Flag this comment for review