Income and Expense Data on Office Building Performance Reported in New IREM Benchmarking Study
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(CHICAGO, IL, Oct. 14, 2010) Total collections for suburban office complexes nationwide in 2009 increased a slight 1.0 percent from 2008 levels to $19.75 per square foot of net rentable area. Downtown properties experienced a mere 0.2 percent year-to-year rise to $21.89 per square foot. Total actual collections for downtown properties were 10.8 percent more last year than their suburban counterparts.
These are among the major findings reported in the 2010 edition of the Income/Expense Analysis: Office Buildings, a new benchmarking study published by the Institute of Real Estate Management (IREM). This annual research study, conducted by IREM since 1976, analyzes operating income and costs for 1,980 private-sector office complexes – some containing multiple buildings – in major metropolitan areas and regions in the United States. It is designed to help property owners, managers, investors, appraisers, lenders, developers and other real estate professionals evaluate a buildings’ performance. The publication also is an invaluable resource to build better budgets; identify ways to grow and trim expenses; market a property more successfully; prepare feasibility studies, appraisals and loan requests; and much more.
OPERATING COSTS DECLINE SLIGHTLY
Total operating costs for suburban buildings in 2009 decreased 0.5 percent from the prior year to $8.80 per square foot of rentable area, while operating costs for downtown properties decreased 1.9 percent to $10.09 per square foot.
Nationally, net operating costs for suburban buildings decreased 3.1 percent to $6.20 per square foot of rentable area in 2009 vs. 2008, whereas those for downtown properties decreased 4.9 percent to $7.13 per square foot.
KEY EXPENSE COMPARISONS
Three of five major expense categories for suburban properties rose last year, with insurance/services experiencing a 6.5 percent increase, real estate and other taxes rising 6.0 percent, and administration/benefits costs rising 1.8 percent. In contrast, utility costs and janitorial/maintenance services both experienced year-to-year declines of 2.8 percent.
All but one of the five major expense categories for downtown properties decreased last year from the year prior. The biggest year-to-year decline, 6.6 percent, was for utilities, followed by janitorial/maintenance services, down 4.4 percent, administration/benefits costs down 2.4 percent, and insurance/services down 1.6 percent. On the upside, real estate and other taxes rose 2.0 percent
Focusing again on major expense categories, but as a percentage of total operating costs, the IREM study reveals that real estate and other taxes along with janitorial/maintenance services accounted for the largest portion of suburban properties’ operating costs, 26.1 percent and 24.0 percent, respectively. Utilities represented 23.3 percent and insurance/services and administrative/benefits represented 13.1 percent and 12.6 percent, respectively.
Similarly, expenditures for janitorial/maintenance services and real estate and other taxes accounted for the largest portion of downtown properties’ operating costs, 25.8 percent and 25.4 percent, respectively. Utilities represented 21.2 percent and insurance/services and administrative/benefits accounted for 12.4 percent and 12.2 percent, respectively.
Overall, suburban properties proved 12.8 percent less costly to operate in 2009 than their downtown counterparts, with all expense categories less than those experienced by downtown buildings.
VACANCY RATES RISE IN BOTH SUBURBAN AND DOWNTOWN BUILDINGS
The national vacancy rate for suburban office properties in operation for 12 months rose 4.0 percent in 2009 vs. 2008, while the rate for downtown properties rose 2.0 percent. The 2009 vacancy level for suburban properties was 11 percent; that of downtown properties was 7 percent.
MEDIAN OPERATING RATIOS
Though downtown properties reported higher total actual collections than suburban properties in 2009, the overall operating experience of both downtown and suburban office markets were similar as reflected by their median operating ratio (total operating costs divided by total actual collections). The median operating ratio at suburban properties was 0.43, while the operating ratio at downtown properties was 0.46.
STUDY EXAMINES MORE THAN 50 SPECIFIC CATEGORIES
The IREM Income/Expense Analysis research study contains detailed analyses of office building operating revenues and expenses for major metropolitan areas and suburban markets in the United States. The income and expense data is presented in dollars per square foot for more than 50 specific categories broken out by building size, height, age, and rental range.
PRICE AND ORDERING INFORMATION
The 304-page Income/Expense Analysis: Office Buildings is available for $434.95 (plus $15.50 shipping and applicable state sales tax). The IREM Member price is $217.95 (plus shipping and handling). To order, contact the IREM Customer Service Department at 430 N. Michigan Ave., Chicago, IL 60611-4090 or call toll-free to (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 firstname.lastname@example.org. Internet users can order the study in soft cover or in a downloadable format by accessing the Publications section of the IREM Web site at www.irem.org.
FOUR OTHER 2010 I/E ANALYSIS STUDIES COMING SOON
Pre-orders are being taken by IREM for its new, soon-to-be available 2010 editions of four other annual Income/Expense Analysis studies: Conventional Apartments ($434.95); Shopping Centers ($434.95); Condominiums, Cooperatives & Planned Unit Developments ($389.95); and Federally Assisted Apartments ($389.95). IREM Members receive a 50 percent discount on each study and member and non-member purchasers of all five studies receive a 15 percent discount on their total order.
NEW ONLINE LAB TRACKS DATA AND TRENDS OVER 10 YEARS
A new, state -of-the-art companion product to each of IREM’s five property sector reports will debut shortly. Called the Income/Expense Analysis Online Lab, an interactive Web site from IREM with unlimited access, the product enables users to download over 10 years of historical data, including over 100 customizable line-item variables, and compare it to the operating data in their portfolio. Specific benefits include being able to (1) make at-a-glance data comparisons by property type, year, line item, and/or location; (2) build and tweak budgets throughout the year; (3) confidently relay precise metrics and trending data to owners and investors.
The price of each Income/Expense Analysis Online Lab ranges from $292.95 to $324.95 for IREM Members and $584.95 to $649.95 for non-members, depending upon the applicable property sector. Purchasers of hard-copy or downloadable Income/Expense Analysis reports and Online Labs will receive a 20 percent discount on their total order.
ABOUT THE INSTITUTE OF REAL ESTATE MANAGEMENT
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.
IREM promotes ethical real estate management practices through its credentialed membership programs, including the Certified Property Manager (CPM) designation, the Accredited Residential Manager (ARM) certification, the Accredited Commercial Manager (ACoM) certification, and the Accredited Management Organization (AMO) accreditation. These esteemed credentials certify competence and professionalism for those engaged in real estate management. IREM also offers CPM Candidate, Associate, Student, and Academic memberships. All members are bound by the strictly enforced IREM Code of Professional Ethics.
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 www.irem.org.