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Office Buildings Show Little Change in Operating Income and Costs Reported in 2006



Total collections for suburban and urban office complexes showed relatively modest or no change in a recent report from the Institute of Real Estate Management (IREM).


By CP Editorial Staff   Commercial Office Facilities

Total collections for suburban and urban office complexes showed relatively modest or no change in a recent report from the Institute of Real Estate Management (IREM).

Total collections for suburban office complexes nationwide in 2006 increased a modest 2.5 percent from 2005 levels to $19.43 per square foot of net rentable area, whereas those for downtown properties decreased .4 percent to $19.25 per square foot. Total actual collections for suburban properties were 0.9 percent more last year than their downtown counterparts, according to IREM.

According to the report, total operating costs for suburban buildings in 2006 rose just 3.5 percent from the prior year to $8.30 per square foot, while operating costs for downtown properties dipped 1.7 percent to $8.85 per square foot of rentable area.

The 2007 edition of the report, Income/Expense Analysis: Office Building, has been conducted by IREM since 1976 and analyzes operating income and costs for over 2,400 private-sector buildings in major metropolitan areas and regions in the United States.

All major expense categories for suburban properties increased modestly except for insurance costs and administrative/benefits costs, which decreased 1.9 percent and 3.6 percent, respectively. Utility costs saw the largest increase, 5.4 percent, followed by real estate and other taxes, up 4.4 percent, and janitorial/maintenance costs, up 2.9 percent, the report finds.

Additionally, national vacancy levels for both suburban and downtown office properties in operation for 12 months or more were exactly the same last year as the prior year. Vacancy levels for suburban office properties were 5 percent and those for downtown office properties were 7 percent.

Though suburban properties reported higher total actual collections than downtown properties in 2006, 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, according to the report.



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  posted on 10/2/2007   Article Use Policy




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