The Impact of COVID-19 on Operating Expense Pass-Throughs in Commercial Real Estate

The abrupt changes in the way we work as a result of COVID-19 have already considerably impacted commercial real estate, and they will only continue to do so throughout budget season. In addition to preparing business plans for the coming year, property professionals are also working to forecast income, operating expenses and capital expenses to predict their property's financial performance at the end of 2020. In finalizing their reforecasts, they are also recalculating projected operating expense pass-throughs to tenants for the current year.

Significant vacancy levels and other factors related to the pandemic have had unintended consequences for operating expense (OpEx) calculations and reconciliations. COVID-19 is expected to have a substantial impact on OpEx pass-throughs for 2020—and perhaps even several more years into the future—as certain expenses (like cleaning and janitorial service) increase, while other expenses (like utilities and trash removal) decrease. With the economic pain of these uncertain times being felt across the board, “we are in this together" has become a popular catchphrase in the COVID-19 era—one that will indeed be tested as tenants and landlords sit down at the virtual negotiating table.

BOMA International and InspiRE Commercial Real Estate Services have partnered to create a resource to help you navigate the new uncertainties surrounding operating expense calculations and reconciliations. The Impact of COVID-19 on Operating Expense Pass-Throughs in Commercial Real Estate provides guidance on steps to take now to ensure a smooth transition into 2021.

This new publication builds on an extensive collection of COVID-19 guidance documents and resources produced and curated by BOMA International throughout 2020. Learn more about BOMA’s ongoing efforts to support commercial real estate professionals throughout the pandemic.

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Looking for additional resources on this topic? Check out BOMA International’s Escalation Handbook for Office Buildings and register for our upcoming webinar on navigating OpEx calculations and reconciliations during the pandemic.