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Operating Expense Gross Up Calculator

Gross Up Formula:

\[ E = \frac{B \times O}{1 - V} \]

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1. What is an Operating Expense Gross Up Calculator?

Definition: This calculator determines the grossed-up operating expenses by accounting for building occupancy and vacancy rates.

Purpose: It helps property managers and landlords fairly allocate operating expenses among tenants based on actual building occupancy.

2. How Does the Calculator Work?

The calculator uses the formula:

\[ E = \frac{B \times O}{1 - V} \]

Where:

Explanation: The base expense is adjusted by the occupancy rate, then divided by (1 - vacancy rate) to account for unoccupied space.

3. Importance of Expense Gross Up

Details: Proper expense gross up ensures tenants pay their fair share of operating costs even when the building isn't fully occupied.

4. Using the Calculator

Tips: Enter the base expense in USD, occupancy rate (default 0.85), and vacancy rate (default 0.15). Occupancy + vacancy should typically equal 1.

5. Frequently Asked Questions (FAQ)

Q1: Why gross up operating expenses?
A: It prevents tenants from bearing the full cost burden when the building has vacancies.

Q2: What's a typical occupancy rate?
A: This varies by market, but 85% is commonly used as a default value.

Q3: How often should I recalculate?
A: Recalculate whenever occupancy rates change significantly or at least annually.

Q4: What expenses should be grossed up?
A: Common area maintenance, property taxes, insurance, and other shared operating expenses.

Q5: Is this calculation lease-specific?
A: Yes, lease terms may specify different gross up methods or caps on certain expenses.

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