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Conventional Rental Buildings Saw Minimal Dips or Increases in Expenses and Rents in 2010, New IREM Benchmarking Study Reports

NOI Levels Rise or Fall Slightly While Vacancy/Rent Loss Levels Show Minor Decline

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(CHICAGO, IL, Aug. 18, 2011) Total expenses for three of four conventional rental apartments (garden; low-rise, 25-plus units; and elevator) dipped between 1.0 and 1.7 percent in 2010 from the prior year, while those for low-rise buildings with 12 to 24 units rose a mere 1.3 percent. Gross possible rents last year for two of the four building types examined rose 0.5 percent and 2.6 percent, respectively, from the year earlier, with the two remaining building types experiencing year-to-year declines of 0.2 percent and 2.1 percent, respectively.
These are among the key findings reported in the 2011 edition of the Income/Expense Analysis: Conventional Apartments, a new benchmarking study published by the Institute of Real Estate Management (IREM). This annual study by IREM analyzes the previous year's operating income and cost figures for 3,059 multi-family rental properties representing over 645,000 units across the United States and Canada. It is designed to help real estate professionals evaluate multi-family development and investment options and compare their buildings' performance to industry norms. The publication also is an invaluable resource to build better budgets; identify ways to trim waste, address inefficiencies, and make needed improvements; prepare feasibility studies, appraisals and loan requests; and much more.

NOI for three building types for which data was available rose slightly or stayed essentially the same last year versus 2009. NOI for Low-rise buildings with 25 or more units rose 6.0 percent to $4.45 per square foot; that for elevator buildings increased 3.5 percent to $8.17 per square foot; and NOI for garden apartments dipped a slight 0.8 percent to $4.86 per square foot.

A 2010 versus 2009 comparison of vacancy and rent loss as a percentage of gross possible income shows a minor decrease - from 0.1 percent to 3.0 percent - for all conventional apartment types. Differing economic conditions and levels of multi-family development experienced by each metropolitan area analyzed produced significant differences in vacancy and rent loss levels. The lowest vacancy and rent loss level in the U.S. was in Boston, MA, where a median vacancy and rent loss of 4.5 percent or less of gross income was reported for the three building types for which data was available.

Owners of three of the four building types analyzed found them slightly less expensive to operate in 2010 than in 2009. Total expenses for garden apartments declined 1.7 percent to $5.13 per square foot; those for elevator buildings decreased 1.3 percent to $7.32 per square foot; and those for low-rise buildings with 25-plus units dipped a mere 1.0 percent to $4.92 per square foot. On the up side, expenses for low-rise buildings with 12-to-24 units rose 1.3 percent to $5.51 per square foot.

Looking at gross possible apartment rent specifics in 2010, elevator buildings experienced the largest gain, 2.6 percent, raising the rent per square foot to $15.15 per square foot last year versus $14.76 the year earlier. Also on the plus side, low-rise buildings with 12-24 units saw rents increase 0.5 percent to $11.82 last year from $11.76 in 2009. By comparison, the rents in garden buildings decreased 2.1 percent in 2010 to $10.43 per square foot from $10.65 the prior year, whereas rents in low-rise buildings with 25 or more units experienced a year-to-year decrease of 0.2 percent, bringing rents to $9.98 per square foot.

Low-rise buildings with 25 or more units in the Southeast region reported the lowest median rents at $7.66 per square foot. Elevator buildings in the West Coast region reflected the highest gross possible rents at $18.31 per square foot.

Utility costs were reported for three of the four building types, with all three showing relatively minor increases in 2010 from the prior year. Elevator buildings continue to have the highest utility costs, rising 5.1 percent last year to $1.23 per square foot. Low-rise buildings with 25-plus units saw a cost rise of 1.4 percent, increasing to $0.75 per square foot, while garden buildings saw a cost rise of 4.6 percent, increasing to $0.68 per square foot.

Maintenance and repair costs for low-rise buildings with 12-24 units experienced a 16 percent increase in 2010 from the year earlier, whereas those for low-rise buildings with 25-plus units fell 13.2 percent. In contrast, maintenance and repair costs for elevator buildings dropped 8.3 percent while those for garden buildings remained unchanged. Garden buildings reported the lowest median maintenance and repair cost at $0.27 per square foot. Low-rise buildings with 12-24 units reported the highest such costs at $0.94 per square foot.

For all building types in 2010, less than 51 percent of a typical property's annual collections were used to cover operating costs, versus less than 53 percent in 2009. Operating ratios remained relatively stable, with garden buildings experiencing the highest operating ratio at 50.8, 0.6 percent lower this past year than the year prior. Low-rise buildings with 12-24 units were the only building type to report a higher operating ratio in 2010 vs. 2009, rising just 0.2 to 48.5 percent.

Three of the four building types examined experienced a decrease in tenant turnover in 2010 vs. the year earlier. Turnover for low rise buildings with 25-plus units declined 8.7 percent to 40.7 percent; that for elevator buildings decreased 8.2 percent to 34.4 percent; and that for garden buildings dipped 1.3 percent to 53.0 percent. By comparison, turnover in low-rise buildings with 12-24 units rose a mere 0.5 percent.

The IREM Income/Expense Analysis research study summarizes data by building type, age, Section 42 properties, turnover and more. The income and expense data for each sample is presented in dollars per square foot of rentable area and as a percentage of gross possible income and dollars per unit. Individual metro market reports for more than 150 cities also are included along with an analysis of vacancy rates and operating unit trends plus a variety of historical trend reports.

The 232-page Income/Expense Analysis: Conventional Apartments is available for $449.95 (plus $15.50 shipping and applicable state sales tax). The IREM Member price is $224.95 (plus shipping and sales tax). To order, contact IREM's Customer Service Department at 430 N. Michigan Ave., Chicago, IL 60611-4090 or call toll-free at (800) 837-0706, ext. 4650. Credit card orders (VISA, MasterCard, Discover or American Express) can be faxed toll-free to (800) 338-4736 or e-mailed to Internet users can order the study in soft cover or in a downloadable format by accessing the Publications section (click on Income/Expense Analysis Reports on the drop-down menu) of the IREM Web site at  As a special incentive, purchasers of the report in print format can also receive it in downloadable Excel file and PDF format for just $99.99.

IREM also has just published new 2011 editions of its four other annual Income/Expense Analysis studies: Shopping Centers ($449.95); Condominiums, Cooperatives & Planned Unit Developments ($404.95); Office Buildings ($449.95); and Federally Assisted Apartments ($404.95). IREM Members receive a 50 percent discount on each study; member and non-member purchasers of all five studies receive a 15 percent discount on their total order. In addition, purchasers of any Income/Expense Analysis book can get it in downloadable Excel file and PDF format for only $99.99.

The Institute of Real Estate Management (IREM) is an international community of real estate managers across all property types dedicated to ethical business practices and maximizing the value of investment real estate. An affiliate of the National Association of Realtors, IREM has been a trusted source for knowledge, advocacy and networking for the real estate management community for more than 80 years.

IREM is the only professional real estate management association serving both the multi-family and commercial real estate sectors and has 80 U.S. chapters, 14 international chapters, and several other partnerships around the globe. Worldwide membership includes nearly 18,000 individual members and over 535 corporate members.

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Collectively, CPM Members in the United States manage nearly $2 trillion in real estate assets, including 11.4 million residential units and 10.4 billion net square feet of commercial space. To learn more about the IREM and its chapter network, call (800) 837-0706, ext. 4650 (outside the U.S. call (312) 329-6000) or visit