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BOMA's Experience Exchange Report Reveals Rising Office Incomes as Industry Emerges From Post-Recession Slump

Widespread Densification Trend Reflected in Latest Data

WASHINGTON, DC -- (Marketwired) -- 07/14/14 -- The Building Owners and Managers Association (BOMA) International, in collaboration with research firm Kingsley Associates, recently released the results of the 2014 Experience Exchange Report® (EER®), its annual benchmarking study, which showed increases across most income and expense categories for privately owned office buildings.

Rental income increased 7.2 percent and overall income increased 7.4 percent in 2013 compared to 2012. Total operating and total operating plus fixed expenses saw increases of 5.3 percent and 5.6 percent, respectively. The upsurge in both income and expenses would indicate post-recession growth across commercial real estate properties.

Overall utility expenses rose by 2.4 percent in 2013, ending a four-year downward trend. Nation-wide security costs grew by 5.8 percent in 2013 compared to 2012, with city centers such as Washington, D.C., Chicago and Seattle seeing increases in security payroll costs. Repairs and maintenance jumped 5.9 percent in 2013 as property professionals began investing in maintenance projects that were put on hold during the recession.

Increases also were seen in office occupancy rates and weekly operating hours with a decrease in square footage per office worker. These figures are in line with the industry-wide trend toward densification of office space and could explain increases in building expenses as more people occupy the same space for longer periods of time.

Commercial property owners and managers found themselves with larger tax bills as municipal and state governments search for additional sources of income. Overall reported fixed expenses grew from $4.15 per square foot to $4.50 per square foot, an 8.4 percent increase. Real estate taxes alone grew 10.5 percent, from $3.63 per square foot in 2012 to $4.01 per square foot in 2013.

"Densification of space is reshaping the commercial real estate landscape," said BOMA International Chair John G. Oliver, BOMA Fellow, managing principal for Oliver & Company. "Increases in both income and expenses in this year's EER indicate both strong industry growth, as well as an adjustment to a denser office environment."

Private Sector Office Building Income Trends

  • Rental income for office buildings rose 7.2 percent, from $25.53 per square foot (psf) in 2012 to $27.38 psf in 2013.
  • Total income rose 7.4 percent, from $26.99 psf in 2012 to $28.99 psf in 2013.
  • Base rent for office buildings rose 6.4 percent, from $21.24 psf in 2012 to $22.60 psf in 2013.
  • Pass-throughs rose 3.2 percent, from $4.11 psf in 2012 to $4.24 psf in 2013.
  • Revenue from escalations rose 13.2 percent, from $4.18 psf in 2012 to $4.73 psf in 2013.

Private Sector Office Building Expense Trends

  • Total operating expenses rose 5.3 percent, from $7.72 psf in 2012 to $8.13 psf in 2013.
  • Total operating + fixed expenses rose 5.6 percent, from $11.75 psf in 2012 to $12.41 psf in 2013.
  • Cleaning costs rose 5.8 percent, from $1.37 psf in 2012 to $1.45 psf in 2013.
  • Repairs and maintenance expenses rose 5.9 percent, from $1.87 psf in 2012 to $1.98 psf in 2013.
  • Utility expenses rose 2.4 percent, from $2.10 psf in 2012 to $2.15 psf in 2013.
  • Roads and grounds expenses rose 16.7 percent, from $0.18 psf in 2012 to $0.21 psf in 2013.
  • Security expenses rose 5.8 percent, from $0.69 psf in 2012 to $0.73 psf in 2013.
  • Administrative expenses rose 4.8 percent, from $1.46 psf in 2012 to $1.53 psf in 2013.
  • Fixed expenses rose 8.4 percent, from $4.15 psf in 2012 to $4.50 psf in 2013.

Private Sector Office Building Occupancy Trends

  • Occupancy rates increased 0.5 percent, from 88.8 percent in 2012 to 89.2 percent in 2013.
  • Reported weekly operating hours increased by 8.6 percent, from 62.3 hours in 2012 to 67.6 hours in 2013.
  • Reported square feet per office worker saw a 4.5 percent decrease, from 317.7 square feet per worker in 2012 to 303.4 square feet per worker in 2013.

Now in its 94th year, the Experience Exchange Report is the industry's largest and most comprehensive benchmarking resource, with a database that has three times more office building data than comparable sources and the most medical office building data. The EER provides insights into the performance of the commercial real estate sector with more than 5,300 buildings in 250 distinct markets across 128 cities in the United States and Canada totaling over 1 billion sq. ft. of space.

The EER consists entirely of voluntarily reported data from commercial property owners and managers. The EER allows users to generate customized reports online using a host of search filters, including building size, type, class, location market, submarket and more, and calculates results in real-time. Reports are easily downloadable as both Excel and PDF documents, and a subscription grants unlimited access; there is no limit to the number of reports users can generate. For more information and to subscribe to the 2014 EER, visit eer.boma.org.

About BOMA International
The Building Owners and Managers Association (BOMA) International is a federation of 93 BOMA U.S. associations and 17 international affiliates. Founded in 1907, BOMA represents the owners and managers of all commercial property types including nearly 10 billion square feet of U.S. office space that supports 3.7 million jobs and contributes $205 billion to the U.S. GDP. Its mission is to advance a vibrant commercial real estate industry through advocacy, influence and knowledge. Learn more at www.boma.org.

Documents and/or Photos available for this release:

2013 Private Sector Expenses
Income vs. Expense Changes

To view supporting documents and/or photos, go to www.enr-corp.com/pressroom and enter Release ID: 375667

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