Why understanding OPEX is important
When it comes to renting office or commercial space, many entrepreneurs focus exclusively on the rental rate, forgetting about additional costs. Operating expenses, or OPEX (Operating Expenses), often come as a surprise to tenants who didn't factor them into their budget planning. At the same time, property owners must clearly understand the structure of these payments to correctly calculate and justify them to tenants.
This isn't just an additional charge "on top." It's a fair mechanism for distributing actual building maintenance costs among everyone who uses it. Understanding what's included in operating expenses and how they're calculated helps avoid conflicts, properly plan budgets, and make informed decisions when choosing premises.
What is OPEX: Definition and core concept
Operating expenses (OPEX) are regular costs for maintaining, servicing, and operating commercial real estate. Unlike rent, which is payment for using the premises, OPEX covers the owner's actual expenses for ensuring normal building operations. Simply put, rent is what you pay for the premises itself, while operating expenses are for having light, heat, cleanliness, safety, and comfort in those premises.
These are expenses that arise regardless of whether the premises are leased or not, but they're fairly distributed among all tenants in proportion to the area they occupy. In international practice, the term OPEX is used to denote operating expenses of any business, but in the context of commercial real estate, it has acquired a specific meaning as building operation costs.
What's included in operating expenses: Main categories
Operating expenses cover only costs for common building needs that cannot be divided among individual tenants. This may include heating the entire building from a centralized system, operation of common ventilation systems, facade lighting during dark hours. All these services are necessary for the building to function as a single complex, ensuring comfortable conditions for all tenants simultaneously. Let's examine several main categories.
Utility services
The largest portion of operating expenses goes to utility services. These include electricity for lighting common areas such as corridors, lobbies, stairwells, heating or air conditioning of common areas, water supply for common restrooms. It's important to distinguish between utility services for common areas and for rented premises. If your office has separate meters, you pay for electricity and water inside the premises separately based on actual consumption.
Cleaning and janitorial services
What is OPEX without cleanliness costs? Regular cleaning of common areas is an integral part of operating expenses. This includes daily cleaning of lobbies, corridors, restrooms, window washing, cleaning of adjacent territory in any season. In premium business centers, cleaning services may also include plant care, maintenance of decorative elements, regular facade washing. The higher the building class, the more attention is paid to cleanliness and aesthetic appearance, which accordingly affects the amount of operating expenses.
Landscaping of adjacent territory
If a building has adjacent territory, operating expenses may include care for green spaces, yard cleaning, territory lighting, parking space maintenance. A neat and well-maintained territory around the building creates a positive first impression and increases the overall attractiveness of the property. This is especially important for buildings located in green zones or on large land plots.
Technical maintenance and building security
Any modern building requires regular technical maintenance. Operating expenses include service maintenance of elevators, ventilation and air conditioning systems, fire safety systems, electrical networks, plumbing equipment. This also includes scheduled equipment inspections and examinations, ventilation filter replacement, maintenance of access control systems, video surveillance, and alarm systems. Professional technical maintenance prevents serious breakdowns and expensive repairs in the future.
Security and safety
Ensuring the safety of tenants and their property is an important component of operating expenses. This may include security company services, reception desk administrator work, video surveillance and access control system maintenance. In some business centers, security operates around the clock, in others—only during business hours. Accordingly, the level of security and cost of this service can differ significantly.
Modern security systems include not only physical security but also electronic access control systems, video surveillance with recording archiving capability, panic buttons, emergency notification systems. All this creates a multi-level protection system that allows tenants to feel safe and focus on their work without worrying about property security and personal safety.
Building management
Building operating costs also include management company services, which coordinate the work of all services, communicate with tenants, resolve current issues, and control service quality. Essentially, this is payment for professional building management that ensures its uninterrupted operation. The management company serves as a single point of contact for all issues related to premises operation.
The management company organizes repair work, concludes contracts with service providers, controls the quality of completed work, keeps expense records, and provides reporting to tenants. Without qualified management, even the most modern building will quickly lose its attractiveness and functionality. Professional management is what distinguishes a quality business center from an ordinary office building.
Current repairs and maintenance
Operating expenses include costs for current repairs of common areas: wall touch-ups, light bulb replacement, minor plumbing repairs, floor covering renewal in high-traffic areas. This is not capital repair but regular maintenance of the building in proper condition. Constant attention to details allows maintaining the building's presentable appearance and preventing serious problems.
Current repairs also include elimination of consequences of natural wear and tear of materials and equipment, updating of outdated interior elements, maintaining the overall aesthetic appearance of premises. The regularity of such measures ensures that the building always looks neat and creates a positive impression for both existing tenants and potential clients who come to view available premises.
Building insurance
Commercial real estate owners insure their properties against fire, flood, other emergencies, as well as against possible losses related to building operation. Part of these costs may also be included in operating expenses, as insurance protects the interests of all building users. This creates an additional level of financial security for both the owner and tenants.
How operating expenses are calculated
Understanding the mechanism for calculating operating expenses helps tenants control the validity of payments, and helps owners establish fair rates. There are several approaches to calculating OPEX, each with its own features and advantages. Let's examine in detail how the amount of operating expenses is formed and distributed among commercial real estate tenants.
Operating expense costs in business centers
OPEX costs in business centers vary widely and directly depend on the building class and service level. In the commercial real estate market, operating expenses can range from $1 USD per square meter to $8.5 per square meter monthly. This significant difference is explained by the service package, service quality, and property prestige.
In Class C and B- business centers, operating expenses are typically at the level of $1-3 per square meter. These buildings offer a basic service package such as common area cleaning, security, minimal technical maintenance, and utility services. These are often older buildings with simpler infrastructure, lacking additional amenities and premium service.
Class B and B+ business centers have OPEX in the range of $3-5 per square meter. Here higher quality service appears, professional management, modern security systems, regular technical maintenance of all engineering systems, and neat adjacent territory.
Premium Class A and A+ business centers set operating expenses at $6-8.5 per square meter. For this money, tenants receive the highest level of service: 24-hour security and concierge services, impeccable cleanliness of all areas, professional building management, modern climate control and ventilation systems, perfectly maintained territory, quality technical maintenance of premium equipment. In such properties, every detail is designed to create the most comfortable and prestigious work environment, which is accordingly reflected in the cost of operating services.
Proportionality principle
The basic principle of operating expense calculation is proportionality. Each tenant pays according to the area they occupy relative to the total leased building area. This is a fair approach that guarantees larger companies pay more and smaller ones pay less, but everyone bears costs proportional to how much space they use.
The calculation formula is based on a simple principle: your share of costs equals your share of total area. If you rent small premises in a large building, your contribution to operating expenses will be correspondingly small. If you occupy an entire floor, you'll pay more. This mechanism ensures fair distribution of actual costs among all building users.
Fixed rate or actual costs
There are two main approaches to calculating operating expenses. The first is a fixed rate per square meter, established at the beginning of the lease and can be reviewed periodically according to party agreement. This method gives tenants cost predictability and facilitates budget planning.
The second approach is payment based on actual costs. The owner regularly tallies actual building maintenance costs and distributes them among tenants. This method is more transparent and fair as it reflects real costs, but less predictable for tenant budget planning. Each of these approaches has its advantages, and the choice depends on the owner's policy and agreements with tenants.
Documentary confirmation
Honest property owners provide tenants with a detailed breakdown of operating expenses, confirmed by invoices and contracts with service providers. This helps avoid misunderstandings and builds trusting relationships between parties. Transparency in financial matters is a sign of a serious and responsible approach to property management.
Regular reporting allows tenants to see where their money goes and verify the validity of expenses. Some management companies even organize periodic meetings with tenants where they explain the expense structure in detail and answer questions. Such openness creates an atmosphere of mutual trust and minimizes conflicts.
What's not included in OPEX
It's important to understand the boundaries of operating expenses and what remains outside their scope. First of all, OPEX doesn't cover the actual rent for premises. This is a separate payment that is the basis of the lease agreement. Operating expenses also don't include internet and phone services. They are always paid by the tenant independently according to the chosen tariff plan and provider.
OPEX also doesn't include capital repairs of the building. This is the owner's responsibility, financed from other sources, usually from reserve funds or from rental income. Repairs inside your premises, replanning, arrangement to suit your needs—these are also your responsibility and expenses. Furniture, equipment, office equipment for your office have no relation to operating expenses. This is the tenant's personal property, which they purchase and maintain at their own expense. Understanding these boundaries helps avoid confusion and conflicts when discussing lease terms and planning office maintenance budgets.
Operating expenses are not additional costs but a necessary component of maintaining modern commercial real estate. They ensure a comfortable, safe, and functional environment for business operations. For tenants, it's important to understand the structure of these costs, demand transparency, and factor OPEX into premises selection. For owners, the key is honest expense calculation, regular reporting, and constant work on optimization without loss of service quality.
FAQ
Can I refuse to pay OPEX?
No, if operating expenses are stipulated in the lease agreement. This is a mandatory part of commercial real estate rental costs.
Why does OPEX differ in different buildings?
The amount of operating expenses depends on building class, service package, service quality, location, and technical characteristics of the property.
How often can operating expenses change?
Usually once a year, but this must be stipulated in the contract. Unilateral OPEX increases without tenant agreement are unacceptable.
What should I do if I think OPEX is overpriced?
Demand a detailed expense breakdown with supporting documents from the owner. Compare with market indicators of similar buildings.
Who is responsible for the quality of services included in OPEX?
The owner or management company is responsible for the quality of service paid through operating expenses.