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What's The Office Leasing Game Costing You?


The Institute of Real Estate Management has taken its annual look at office market returns via its 2015 Income/Expense Analysis Reports and has broken down the costs of property management/ownership by subsection. 

The sample consists of nearly 2,900 buildings. Before Bisnow jumps into the financial findings, let’s take a quick look at the makeup of properties researched.

Building size is holding steady. Despite the room to grow in suburban areas, typical office properties in these regions maintained an average of 111k SF and held about six tenants. Office buildings in downtown areas clock in at 289k SF on average and house about 11 tenants. But they’re a bit on the older side. Over 80% of suburban properties have been built within the last 36 years, whereas the majority of urban properties skew a few years older.

In suburban markets, revenues are up over the past three years, climbing from $18.72 in 2013 to $19.77 at the close of 2015. Many costs have risen as to keep pace with these revenues, but overhead is not rising across the board.


Utilities jumped from $1.87/SF in 2013 to $2 in 2014, before settling back to $1.93. Janitorial and maintenance rode a similar wave, rising from $2.12/SF to $2.25 before sliding back slightly to $2.21 in 2015. The two steps forward, half step back rhythm affected several other expense categories with areas such as administrative/benefits actually dipping by two cents over the three-year spread. Taxes also dropped very slightly.

Most importantly, total operating costs finished at $8.32/SF in 2015 despite rising from $8.39 to $8.56 between 2013 and 2014. Occupancy levels finished 2% higher, landing at 96% in 2015.

It's a similar story on the metro side. Total collections rose from $21.47/SF to $22.93 in 2014 before sliding back slightly to $21.86 last year. Utilities spiked in 2014 as well, jumping from $2.17/SF to $2.31 and rolling back a bit to $2.24 last year.

Total operating costs are down, settling in at $10.20/SF after climbing to $11.14 last year. However, after holding steady at 93% between 2013 and 2014, occupancy levels dipped to 92% last year.

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Related Topics: IREM, operating expenses