The Building Owners and Managers Association (BOMA) International’s most long-lasting and popular research publications — the Experience Exchange Report (EER) — hit a major milestone in 2000, surveying nearly one billion square feet of North American office space. The result is the largest sample of income and expense data for office buildings the association has ever captured in its 70-plus year history of producing the ERR.
Even more promising are the results of the 2000 EER, which give an excellent prognosis for the burgeoning commercial real estate industry. The U.S. private sector commercial office building market, for example, continued its surge forward with net operating income (NOI) up for the fifth year in a row. By the end of 1999, NOI was averaging $11.09 per rentable square foot (rsf), up more than 10 percent over the preceding year for the first time since the 1980s. The nation’s building owners and managers accomplished this impressive growth by increasing total income by 4.03 percent while reducing total expenses by 2.09 percent. (See graph on page 5 for five-year financial trends.)
In Canada, NOI in the private sector jumped to $11.59 per rsf, a full 24 percent increase that was unfortunately tempered somewhat by mounting real estate taxes, which went from $3.89 per rsf in 1998 to $4.65 in 1999, an increase of almost 20 percent. Still, such a large increase in NOI cannot be overlooked and is due in large part to improving office market conditions in many of Canada’s urban centers, particularly suburban Toronto, Ottawa and Vancouver. (See graph on page 6 for five-year financial trends.)
Turning to the public government sector of the industry, data gathered from U.S. buildings showed an increase in operating expenses of 7.6 percent, to $5.66 per rsf over 1998 figures, although these expenses are still below the private sector average ($5.72). The increase in operating expenses was fueled by large percentage increases in administrative expenses and security expenses. Alternatively, government buildings did report lower utility costs and roads/grounds expenses — an opposite trend from BOMA’s observations in the private sector.
In Canada, total operating expenses for government buildings also increased — by 17 percent — and is largely attributable to significant increases in security and administration (41 percent) and moderate increases in utilities (18.2 percent); repairs and maintenance (12.1 percent); and cleaning (8.7 percent). It appears that the age of government sector buildings is largely to blame for the large increases in expenses; on average, government sector buildings are 41 years old while private sector buildings are just 20 years old.
BOMA International’s EER also further expanded its surveying of corporate facilities in 2000 and learned that production/processing facilities again have the highest operating expenses, at $9.25 per rsf. Corporate facilities associated with the utility industry were also more expensive to operate — at $7.49 per rsf — than other industry-related facilities, a change from last year’s survey results. Overall, corporate facilities located in downtown areas reported a decrease in total expenses fueled by lower operating expenses. In the suburbs, corporate facilities reported an increase in total expenses, caused by an increase in fixed expenses.
Other highlights of the 2000 EER include rankings of cities in terms of the highest and lowest office rents; the markets with the highest and lowest average total expenses per square foot; and the markets with the highest and lowest real estate taxes.
The 2000 EER provides published tables of operating income and expense data for over 5,000 office buildings located throughout North America. This sample includes 3,927 U.S. private sector properties; 847 U.S. government office buildings; 183 publicly held Canadian properties; and 316 government buildings in Canada. In total, this sample covers over 960 million square feet of office space in North America representing 126 cities.
The 2000 Experience Exchange Report is available in print to BOMA members for $155; list price is $275. The EER is also available on CD-ROM for $325, members; and $495, list price. To order either version, call 1-800-426-6292. Participants in the survey also receive special discounts. For more information, visit the BOMA International Web site at www.boma.org.
