Office Sector Expenses Outpace Income Growth
Abundant capital and improving occupancy rates have contributed to an environment conducive to rising operating expenses. And, as the data in BOMA International’s recently released 2015 Office Experience Exchange Report (Office EER) shows, this is exactly what has occurred in the commercial real estate marketplace.
An analysis of a specialized control sample of U.S. private-sector buildings that submitted both 2013 and 2014 data to the Office EER reveals that total operating expenses outpaced rental growth, increasing by an average of 6.1 percent or $0.49 per square foot (psf). This overall increase in expenses similarly impacted buildings regardless of whether they were located in downtown or suburban areas, though downtown buildings still tend to cost more to operate—an average of $0.80 psf. Among the property types included in the Office EER database, operating expenses rose most for general multitenant buildings, which reported an average increase of 6.8 percent, or $0.54 psf. Medical office buildings saw a smaller increase of 3.7 percent ($0.30 psf). Corporate facilities were best able to control expenses, reporting an average increase of only 1.1 percent ($0.09 psf).
A full analysis of office sector trends illustrated by 2015 Office EER data can be found in the September/October 2015 issue of BOMA Magazine. Want more great insights specific to your building or market? Subscribe to the Office EER—and the new Industrial EER—at eer.boma.org.