June 11, 2004—The U.S. office market reported the lowest occupancy rate in the last five years, according to the data collected by BOMA Internationals Experience Exchange Report (EER) 2004. The 2003 private sector results are the weighted average responses of 3,426 buildings representing approximately 700 million square feet of office space. Even with the overall economy signaling modest growth, job growth remains slow and is the cause for office buildings reporting the lowest occupancy in five years (88.54 percent in 2003 vs. 92.33 percent) in 2002.
The 2004 BOMA Experience Exchange Report provides tables of operating income and expense data for over 5000 office buildings located throughout North America for the calendar year 2003.
This sample includes 4082 U.S. private sector properties, 1060 U.S. government office buildings, 83 privately held Canadian properties, and 281 government buildings in Canada. In total, this sample covers almost a billion square feet of office space in North America. 306 cities are represented in this years report, including approximately 50% Class A properties, 47% Class B and 3% Class C.
The US office market reported the lowest occupancy rate in five years, and for the first time in 9 years reported a significant decline in Net Operating Income (NOI). However, as office income declined, more space was leased to retail outlets resulting in a 5 percent increase in income from retail space.
Expense data shows mixed signals as some operating expense categories increased from 2002 while some categories including utilities, cleaning and administrative expenses showed a decrease in the amount of dollars spent. The most noticeable decline was in the amount spent on administration per square foot in 2003, confirming the fact that increasing efficiencies while lowering the overall administrative costs is a top concern of management. Building security remained a high priority in 2003 as the amount spent on security remained at the elevated levels reported in 2002 and insurance costs increased by 21 percent further indicating managements commitment to building security.
Total Operating Expenses in the government sector, consisting of federal, state, and local properties, increased by 7.8%. Similar to 2002, most expenses line items showed an increase with the largest percentage increase in maintaining roads and grounds, cleaning and utilities.
For more information, contact Ron Burton at 202/326-6350.
