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Modest Increases in 2008 Total Operating Income and Costs of Office Buildings Reported
Total collections for suburban office complexes nationwide increased by 1.3 percent in 2008 from 2007 levels to $19.56 per square foot of net rentable area.
Those for downtown properties experienced a double-digit rise of 10 percent to $21.84 per square foot, according to a benchmarking study published by the Institute of Real Estate Management (IREM).
Total operating costs for suburban buildings in 2008 rose 4.4 percent from the prior year to $8.84 per square foot of rentable area, while operating costs for downtown properties increased 9.1 percent to $10.29 per square foot, according to the 2009 edition of the Income/Expense Analysis: Office Buildings.
Nationally, net operating costs for suburban buildings increased 3.4 percent to $6.40 per square foot of rentable area in 2008 vs. 2007, whereas those for downtown properties increased 8.7 percent to $7.50 per square foot.
As a percentage of total operating costs, the study reveals janitorial/maintenance services along with real estate and other taxes accounted for the largest portion of suburban properties' operating costs, 24.5 percent each. Utilities represented 23.9 percent and administrative/benefits and insurance/services represented 12.3 percent and 12.2 percent, respectively.
Similarly, expenditures for janitorial/maintenance services and real estate and other taxes accounted for the largest portion of downtown properties' operating costs, 26.4 percent and 24.4 percent, respectively. Utilities represented 22.3 percent and insurance/services and administrative/benefits accounted for 12.3 percent and 12.2 percent, respectively.
The 2008 median operating ratio (total operating costs divided by total actual collections) at suburban properties was 0.45, while the operating ratio at downtown properties was 0.47.
The national vacancy rate for suburban office properties in operation for 12 months rose 2.0 percent in 2008 vs. 2007, whereas the rate for downtown properties remained the same. The 2008 vacancy level for suburban properties was 7.0 percent; that of downtown properties was 5.0 percent.
This annual research study, conducted by IREM since 1976, analyzes operating income and costs for 1,850 private-sector office complexes in major metropolitan areas and regions 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.