What shopping center management costs

Shopping center owners in Los Angeles and Orange County need to look beyond the management fee percentage. The fee base, CAM recovery and separate charges for leasing and projects all affect the cost. Compare proposals against the same property and its leases.

Retail shopping centers

Most shopping center tenants are on NNN leases, so the manager budgets and bills CAM, taxes and insurance, reconciles them each year, collects rent and supervises vendors and projects.

The management fee and its base

The fee is normally a percentage of what the property takes in, called gross receipts, gross revenues or effective gross income, and the definition sets the dollar amount. In the master property management agreement that a Phillips Edison shopping center REIT filed with the SEC, the fee is 4.0% of "Gross Receipts," which include minimum and percentage rent plus what tenants pay for common area maintenance, taxes and insurance.

Few commercial rates are published, and their fee bases differ. Cox, Castle & Nicholson, a California real estate law firm, described a typical third-party fee in 2014 as 2.5% to 4% of gross project revenues. Genuine publishes 5% of monthly rental income. Together these put the fee at roughly 2.5% to 5%, on bases that are not identical.

Recovering the fee through CAM

According to Cox Castle, landlords typically expect to include both a third-party management fee and an administrative fee in CAM expenses, the administrative fee being a percentage of other CAM expenses (10% to 15% in its example). Anchor tenants sometimes negotiate to pay only the administrative fee, reduced to 10% and calculated without taxes and insurance. Caps on CAM are fairly unusual and often apply only to "controllable" expenses.

The leases affect how much of the fee tenants reimburse. Before comparing proposals, review how the leases define management and administrative fees, any cap, and which tenants carve them out. Whatever tenants do not reimburse comes out of your NOI.

Leasing commissions on new leases and renewals

For commercial leases the commission is usually a percentage of the total base rent over the term, paid by the landlord. The Klabin Company, a Southern California brokerage, wrote in December 2025 that lease commissions "typically range from 4% to 6%," figured on total base rent over the term and usually paid when the lease is signed. MIG Commercial Real Estate Services, a Los Angeles area brokerage, gives the same range for California. When the tenant has its own broker the commission is shared, "often 50/50" per Klabin, and Lee & Associates' Long Beach office uses an even split in its example. These articles lean toward industrial property, so read them as general commercial figures.

Renewals and option exercises need their own line in the agreement. Phillips Edison's 2017 annual report, for example, describes a leasing fee paid to the property manager when a tenant exercised an option to extend. Ask each manager for its rates on new leases, renewals, options and expansions, and whether the rate changes for later years of a long lease or when no outside broker is involved.

Construction management

Supervising a capital project or tenant improvement work usually carries a separate fee. The DRE's Reference Book notes managers frequently receive additional compensation for supervising major repairs or alterations, and the Phillips Edison 10-K describes its fee as "usual and customary" for similar projects in the area. I found no published survey I would rely on for a range. If a proposal quotes a percentage, ask whether it covers hard costs only or soft costs too, whether small projects are exempt, and whether it applies to work paid from a tenant's allowance.

Accounting and CAM reconciliation

After year end the manager reconciles actual CAM, tax and insurance costs against what each tenant paid under its lease. The Phillips Edison agreement also has the manager prepare a budget and report results against it monthly. Orange County Property Management lists CAM reconciliation in its full-service commercial management. Ask whether reconciliation is in the base fee and when statements go out. Cox Castle notes tenants commonly ask the landlord to pay for an audit that finds an overcharge above a threshold, typically 3% to 5%.

Fee summary

Comparing two proposals line by line

Price the same year under both proposals, then compare terms that may not appear as a fee.

What is included. List what each covers in the base fee and what is billed separately. Check whether CAM reconciliation, leasing and project supervision are included.

Termination. Find the term, the notice period and any cancellation fee. The Phillips Edison agreement can be ended by either party on 30 days' written notice. Ask whether any fee continues on a tenant the manager placed after the agreement ends. Under B&P 10176(f), a licensee can be disciplined for collecting a fee under an exclusive agreement for these services that lacks a definite, specified termination date.

Trust account handling. Ask which bank holds the trust account, whether it is in the broker's name as trustee, who signs on it, whether deposits and reserves are held there, and how often it is reconciled.

Reporting. Ask for a sample monthly owner statement and year-end package; the DRE's Reference Book recommends a monthly accounting and a detailed annual statement. Ask for a sample CAM reconciliation too. The Phillips Edison agreement requires a monthly reporting package within 15 days after each month ends.

Spending authority. Agreements set what the manager can spend without asking. Phillips Edison's requires approval for unbudgeted items over $10,000, and its property addendum form includes an optional $2,500 per-matter limit.

After hours. Ask whether staff or an answering service takes calls at night and on weekends, how fast an urgent repair is dispatched, and the name of the person who takes the call.

California rules that apply

A broker license is required

Business and Professions Code section 10131(b) defines a real estate broker to include anyone who, for compensation and "for another or others," leases or rents property, solicits prospective tenants, or "collects rents from real property, or improvements thereon." An owner managing their own property falls outside it. You can check a license and any discipline on the DRE's public license lookup. The DRE's audit guidance also explains that B&P 10140.6 requires the license number on first-contact solicitation materials.

Trust funds

Rents, deposits and reserves a manager collects for you are trust funds. Under B&P 10145(a), a broker must deposit them, unless they go straight to a neutral escrow or to the owner, into a trust fund account at a bank or recognized depository in California, and keep them there until disbursed on the instructions of the person entitled to them. Only the broker, or people the broker authorizes in writing, can sign on the account, and an unlicensed signer requires fidelity bond or insurance coverage.

The DRE's regulations, summarized in its audit guidance and its Reference Book chapter on trust funds, add the working rules. Funds go into the trust account within three business days (Regulation 2832). The broker keeps a record of all trust funds and a separate record for each owner or property (Regulations 2831 and 2831.1) and reconciles them at least monthly (Regulation 2831.2). The broker's own money stays out, apart from up to $200 for bank charges, and earned fees must come out within 25 days (Regulation 2835 and B&P 10176(e)). These are among the violations the DRE cites most often in audits, so ask a prospective manager how it handles each one.