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Washington, D.C. — Sept. 3, 2015 — The Building Owners and Managers Association (BOMA) International, in collaboration with research firm Kingsley Associates, recently released the 2015 Office Experience Exchange Report (Office EER), its annual office sector benchmarking study.
The data from the 2015 Office EER shows definite increases in income levels offset by increased expenses for privately owned office buildings in the United States. A continuing trend towards densification also may be counterbalancing gains from a strengthening economy.
For the second straight year, the U.S. office sector has posted significant income growth, suggesting that the commercial real estate industry finally has turned a corner after struggling through the depths of the Great Recession. According to the 2015 Office EER, rental income for U.S. private-sector office buildings increased 5.3 percent from 2013 to 2014, and overall income for these properties climbed 6.2 percent during this same timeframe.
Accompanying these income gains were increases in total operating expenses and total operating plus fixed expenses, which rose 6.1 percent and 6.6 percent, respectively. While a considerable portion of this increase can be attributed to rising utility costs — illustrated by year-over-year utility expenses jumping a whopping 7.9 percent — the uptick also seems to indicate that building owners and managers are moving full steam ahead on maintenance projects and other property improvements that were put on hold during the recent recession. Repairs and maintenance expenses, for example, increased 6.2 percent from 2013 to 2014.
Another factor potentially contributing to an increase in expenses is the continuing industry-wide trend of office densification. Reported square feet per office worker dropped another 1.5 percent in private-sector office buildings, from 293.7 square feet per worker in 2013 to 289.3 square feet per worker in 2014. This rise in office worker density can strain building infrastructure and add operational expenses, as HVAC systems work harder to cool spaces and electricity use increases to power the growing number of computers and other devices.
For more information on BOMA, visit www.boma.org.
