Operating Costs
Explore operating costs in Canadian real estate: what they include, how they’re passed to tenants, and how they impact profitability and valuation.
June 16, 2025
What are Operating Costs?
Operating costs are the recurring expenses associated with owning and managing a property, including taxes, insurance, utilities, repairs, and property management fees.
Why Operating Costs Matter in Real Estate
In Canadian real estate, operating costs influence rent levels, investment returns, and budgeting for both commercial and residential properties.
Typical operating costs include:
- Property taxes
- Building insurance
- Utilities (heat, water, electricity)
- Maintenance and repairs
- Management fees
In commercial leases, these costs are often passed through to tenants in full or in part, depending on lease structure (e.g., triple net or gross).
Understanding operating costs helps buyers, tenants, and landlords accurately project cash flow and value properties effectively.
Example of Operating Costs in Action
The landlord includes snow removal and building insurance in the operating costs billed back to the retail tenant under their net lease.
Key Takeaways
- Includes recurring property-related expenses
- Affects profitability and tenant charges
- Varies by lease type and property use
- Must be factored into financial planning
- Important for both owners and tenants
Related Terms
- Net Lease
- Triple Net Lease
- Gross Lease
- Property Management
- Budgeting
6525 Mississauga Road and its surrounding context. (RBC Capital Markets & CBRE)
Property details for 6525 Mississauga Road. (RBC Capital Markets & CBRE)
National average resale-price growth and housing-starts growth, smoothed over three months. The comparison illustrates the cycle; it does not establish how much a price change causes construction to change.
Trailing 12-month starts in centres of 50,000 or more remove the usual monthly seasonality. Ownership combines the homeowner and condominium categories; rental is shown separately.
Six-month averages of provincial starts, expressed at annual rates. The smoothing reduces the influence of individual apartment projects.
The same August benchmark compared with two different starting points. Three-month changes are not annualized.
Average sale prices show the difference in purchase costs across markets. They do not measure affordability relative to local incomes or construction costs.
Newfoundland and Labrador remains above its pre-pandemic sales pattern, but August activity was below last year. Historical lines retain their original release vintages.
Average and median describe different aspects of the same month’s transactions. Both are affected by the mix of homes sold.
Category averages compare different homes and locations; the gaps are not estimates of the cost to upgrade an otherwise identical property.
The five categories shown account for 5,000 of the board’s 5,057 sales. The remaining 57 transactions were in other housing categories.
Monthly observations are not seasonally adjusted. Active listings count properties available at month-end; they are not construction inventory.
Average and median prices share one dollar axis. These unadjusted transaction measures do not control for changes in the homes sold.
TRREB’s 416/905 categories compare the apartments sold in each area. The difference does not isolate a location premium for equivalent units.
5680 Oak Street in Vancouver and its surrounding context. (MCMP Architects)
Ground-level renderings of the tower proposed for 5680 Oak Street in Vancouver. (MCMP Architects)