Commercial Real Estate Leasing in 2026: How Rising Operating Expenses Are Reshaping CAM Structures

Property insurance premiums on a 120,000 SF power center in Phoenix went up roughly $100,000 in a single year—from $0.89/SF to $1.73/SF, a $0.84/SF increase across the building's footprint. Under a NNN lease, that $100,000 increase hit tenants' operating expense billings directly with no cap. That's what commercial real estate leasing looks like heading into 2026: a negotiating environment where operating expense escalation isn't theoretical, it's hitting occupancy costs hard enough to drive lease restructuring, tenant disputes, and in some cases, early vacancies.

What "Commercial Real Estate Leasing" Actually Covers

Commercial real estate leasing is the contractual framework for how businesses occupy space. The term is broad—it spans:

• Office: Multi-tenant buildings, single-tenant campuses, medical office, coworking-adjacent structures
• Retail: Regional malls, power centers, strip centers, freestanding single-tenant (NNN properties)
• Industrial: Warehouse, distribution, manufacturing, flex/R&D
• Mixed-use: Ground-floor retail with upper-floor office or residential

Each property type has evolved distinct leasing norms around term length, expense structure, renewal options, and tenant improvement allowances. What's common across all of them right now is cost pressure.

For a foundational explanation of how these leases are structured, start with the commercial lease types guide and the commercial lease rent structures overview.

The Operating Expense Surge: What's Driving It

Three separate cost vectors are hitting commercial property operating budgets simultaneously in 2025–2026:

Insurance

Commercial property insurance is the single fastest-rising line item in most operating budgets. The reinsurance market contraction that started in 2022–2023 has rippled through to primary insurance pricing. Specific data points from deals we've seen:

• Class A office in Miami: insurance went from $1.10/SF to $2.15/SF between 2022 and 2025
• Retail strip center in Dallas: up 58% over three years on a per-SF basis
• Industrial portfolio in California: carrier non-renewals required mid-lease market replacement at 40–60% premium increases

Under NNN leases, these costs are non-controllable and pass to tenants without cap in most lease forms. Under gross and modified-gross leases, the landlord absorbs them—which is why some office landlords are actively trying to convert upcoming renewals from gross to modified-gross structures.

Property Taxes

Tax appeals and assessment resets are creating volatility in the property tax line. Key dynamics:

• Sun Belt reassessments: Markets like Austin, Nashville, and Raleigh that saw 40–60% value appreciation from 2020–2023 are now seeing reassessments catch up, driving tax increases of 15–30% in a single cycle.
• California Prop 13 transfers: When older commercial properties sell in California, they trigger a reassessment to current market value—creating step-function tax increases that NNN tenants bear.
• Appeals delays: Successful tax appeals create a credit that landlords must pass through to tenants proportionally, requiring reconciliation adjustments.

Property taxes are always non-controllable and fully passed through under NNN. The 2026 property tax increases post covers this in more detail.

Labor and Maintenance Costs

Skilled trade labor (electricians, HVAC technicians, plumbers) increased 18–24% in hourly rates from 2022 to 2025 in most major markets, driven by post-COVID demand and reduced trade school enrollment. This shows up in:

• Routine maintenance contracts (janitorial, landscaping)
• HVAC service agreements
• Elevator maintenance (particularly relevant for multi-story office)
• Snow removal and parking lot maintenance

Unlike insurance and taxes, labor-driven maintenance costs are typically classified as controllable. That means they're subject to annual caps—typically 3–5%—under most NNN lease CAM provisions. Landlords who absorbed above-cap increases in 2022–2023 effectively subsidized tenants during the inflation spike.

How CAM Structures Are Being Renegotiated by Market

The pressure isn't uniform. Market-by-market dynamics shape how landlords and tenants are adjusting:

Industrial / Logistics

Industrial remains the strongest sector for landlord leverage heading into 2026. Vacancy rates in key distribution markets (Inland Empire, Chicago O'Hare submarket, Savannah port area) remain below 5%. Landlords are largely maintaining NNN structures with minimal concessions on expense terms.

Where you're seeing pushback: large logistics tenants (3PLs, e-commerce fulfillment) with 500,000+ SF requirements are successfully negotiating controllable expense caps at 3% annual, insurance in a separate non-capped bucket, and property tax appeals sharing provisions (tenant gets credited for any appeal savings proportional to their share of taxes paid).

CAM for industrial is relatively straightforward—parking lot maintenance, lighting, landscaping, exterior maintenance. The what is included in CAM expenses guide breaks down which items typically appear in industrial vs. retail CAM pools.

Office

Office leasing is structurally different from every other property type in 2026. With national office vacancy above 18% (and effective vacancy—including shadow space—higher), tenants hold negotiating power they didn't have before COVID.

Lease structure shifts:

• Modified-gross continues to dominate urban Class A. The 2020 base year is favorable for many tenants since occupancy was low and some operating costs were reduced—landlords are trying to move base years forward to 2023 or 2024 where expenses are higher.
• Some suburban Class A landlords are offering gross lease structures at premium rents to attract tenants who want cost certainty.
• Shorter terms (3–5 years vs. 7–10) mean landlords reset rent and expense terms more frequently.

The commercial vs residential lease post covers why office leases have specific tenant-protection provisions (audit rights, exclusions, caps) that residential leases don't require.

Retail

Retail's biggest story in 2026 is the bifurcation between grocery-anchored and necessity retail (performing well) versus discretionary retail (struggling). CAM structures diverge accordingly:

Grocery-anchored centers: Anchors typically negotiate separate lease economics with caps, exclusions, and sometimes fixed CAM contributions rather than pro-rata. Inline tenants bear more of the operating expense burden because anchor contributions are limited. This is the anchor exclusion CAM issue at work.

Power centers: Big-box tenants with market leverage are pushing for controllable expense caps (3–5% per year), inflation adjustments tied to CPI rather than actuals for controllable costs, and enhanced audit rights.

Strip centers: Smaller tenants have less leverage, but with high vacancy in some markets, landlords are offering modified-gross structures to close deals rather than leave space empty.

Multi-Family Adjacent (Mixed-Use Ground-Floor Retail)

Mixed-use ground-floor retail in residential towers creates a unique CAM allocation challenge: how do you allocate common area expenses between retail and residential uses? The retail tenants typically pay NNN-style operating costs, but the CAM pool definition must exclude residential amenities. This requires careful lease drafting and ongoing expense allocation tracking.

What's Changing in Lease Negotiations

The 2024–2026 wave of lease renewals—particularly for tenants who signed 5–7 year leases during the post-COVID rebound years of 2019–2021—is creating negotiation dynamics that differ from prior cycles:

More defined CAM pools. Vague CAM inclusion language that served landlords well when costs were stable is getting replaced with explicit inclusion/exclusion schedules. Tenants are demanding that capital expenditures (roof replacement, HVAC system replacement, parking lot resurfacing) be excluded from CAM or amortized over useful life rather than expensed in the year incurred.

Insurance pass-through caps or carve-outs. Given the volatility in insurance costs, some tenants are negotiating an insurance subcap separate from the controllable expense cap—something like: controllable expenses capped at 4%/year, insurance capped at 8%/year, taxes uncapped. This is a meaningful tenant concession from landlords but more defensible than a blanket cap that might leave them unable to maintain adequate coverage.

Audit rights becoming standard. Previously, audit rights were a tenant ask that many landlords resisted. The CAM overbilling liability exposure has made tenants more insistent, and landlords who have clean books are increasingly granting 12–18 month audit windows. Tenants with audit rights should review the CAM reconciliation errors guide to understand what to look for.

Technology requirements in lease forms. Some institutional tenants are requiring landlords to provide reconciliation data in machine-readable formats (Excel, structured PDFs) rather than PDF statements. This enables faster verification and audit.

The Gross-Up Provision: Still Misunderstood in 2026

Across all the lease negotiation evolution happening, gross-up provisions remain one of the most misunderstood and frequently abused provisions in commercial leasing. Under NNN leases in multi-tenant buildings, variable operating expenses are often grossed up as if the building were 90–95% occupied.

Done correctly, gross-up protects existing tenants from bearing fixed cost components of expenses at an unfair per-SF rate when occupancy is low. Done incorrectly—applying gross-up to property taxes (a fixed cost that doesn't scale with occupancy), or applying a gross-up multiplier to already-fixed expenses—it results in over-billing.

The CAM gross-up calculation guide is essential reading for anyone billing or disputing these provisions.

FASB ASC 842 and Its Continuing Impact on CRE Leasing

FASB ASC 842 lease accounting standards (effective for all public companies since 2019, private companies since 2022) continue to shape how corporate tenants approach lease terms. The standard requires capitalizing operating leases on the balance sheet, which creates incentives to:

• Shorten lease terms (reduces the right-of-use asset and lease liability)
• Include more variable (non-fixed) lease payments (variable costs like CAM estimates aren't capitalized)
• Add more renewal options rather than locked-in term length

This has direct implications for CAM structure negotiations. CAM estimated payments that qualify as variable under ASC 842 don't appear on the balance sheet—which means tenants actually prefer the structure where CAM estimates are separated from base rent rather than bundled. From the landlord side, this means separate CAM billing (rather than bundled into base rent) is actually tenant-favorable for accounting purposes.

The FASB ASC 842 CAM impact post covers this in full detail.

Key Metrics to Watch in CRE Leasing Through 2026

For property accountants and asset managers tracking the market:

Managing the Complexity

A portfolio with diverse lease structures—some gross, some modified-gross, some NNN—requires tracking expense allocations across different methodologies simultaneously. When a tenant's lease expires mid-year and their replacement comes in with different expense terms, you need to reconcile partial-year obligations under each structure.

The CAM reconciliation deadlines post outlines the calendar most property managers follow to stay on top of these obligations across a multi-property portfolio.

CapVeri's platform handles multi-structure portfolios by mapping each tenant's lease terms to the correct expense pass-through logic automatically—so the system applies gross-up to the right tenants, applies base year stops where applicable, and flags when actual expense allocations deviate from what the lease allows.

For a complete picture of CRE leasing structures, see the commercial lease types guide and NNN lease vs gross lease comparison. If you're evaluating NNN investment properties, the NNN investment properties CAM analysis covers due diligence specifically.