Trends. Trends in Office Buildings Operations, 2011

Transcription

1 Trends Trends in Office Buildings Operations, 2011 THE SAMPLE This 2012 edition represents 2011 data collection from nearly 2,700 private-sector buildings across the United States and Canada. This year s sample represents 2,140 office developments, some of which contain multiple buildings. Additionally, 370 Medical Office Buildings were included in a separate report (Part 6), and are not included in these trend reports. Table 1 displays some of the characteristics of this year s sample. The typical suburban office property contained an average of 135,710 square feet and is occupied by an average of 10 tenants. Office buildings in downtown areas were typically much larger, containing an average of 349,365 square feet and 15 tenants. The suburban office buildings tend to be relatively new with 86.3 percent of them built within the last 32 years. Downtown properties were more diverse in composition with 64.9 percent constructed since Suburban office buildings are mostly structures of 1 to 10 stories in height percent of the suburban sample falls into this category. Downtown properties generally contain at least five stories percent of this year s downtown sample contains more than ten stories while 26.3 percent had five to ten stories. Table 1: Sample Distribution 2011 Downtown and Suburban Total Sample Number of Buildings Reported Item Downtown Suburban Number of Office Developments 465 1,675 Number of Buildings 543 2,146 Average Size of Buildings (Sq. Ft.) 349, ,710 Average Number of Tenants Year of Construction* Downtown Suburban Before to date 0 4 Total *Not all buildings report year of construction SUBURBAN MARKET SUMMARY Table 2 and Chart 1 summarize the median income and expenses for suburban office complexes across the nation. Total collections decreased slightly in 2011 to $18.22 per square foot of net rentable area. This represents a 1.3 percent decrease from The most significant variance for individual expenses occurred for Janitorial/Maintenance, increasing 3.0 percent from last year. Total operating costs decreased 0.7 percent to $8.32 per square foot. Income/Expense Analysis : Office Buildings 4% 2% 0% -2% -4% Chart 1: Cost Variations by Category 2011 Suburban Total U.S As a Percentage Increase Over 2010 Expenses -2.8% -0.9% 0.0% -2.7% 3.0% Table 2: Median Income and Expenses Suburban -0.7% Line Item Total Collections $19.75 $18.46 $ % Utilities % Janitorial/Maint % Admin./Benefits % Net Operating Costs* % Insurance/Services % R.E./Other Taxes % Total Operating Costs % Occupancy Levels 89% 89% 89% 0.0% *Insurance not included in Net Operating Costs Table 3 presents the median net operating costs (including insurance) for suburban office buildings by geographical regional areas. The map on page 20 defines the geographical areas and the codes which represent them. Due to the small sample sizes of some areas, several individual regions have been grouped to form larger and more statistically representative areas (Regions 1, 2 and 3; Regions 7, 8 and 10). Nationally, net operating costs increased to $6.03 per square foot. All Regions net operating costs decreased with the exception of the Northeast and Mid-Atlantic: and West Coast regions. The Northeast and Mid-Atlantic region reported the highest net operating costs, $6.78. The Southeast region reported the lowest net operating cost, $

2 Income/Expense Analysis : Office Buildings Trends Table 3: Median Net Operating Costs Suburban 1,2,3 $7.11 $6.70 $ % % % % 7,8, % % U.S % Table 4 isolates the median utility costs for suburban properties by region. As a whole, suburban office utilities costs remained the same at $1.96 per square foot. All regions experienced decreases with the exception for the West Coast region. The Southwest region experienced the highest utility costs at $2.12, while the Central, Rocky Mountain, and Northwest region reported the lowest at $1.76. Table 4: Median Utility Costs Suburban 1,2,3 $2.40 $2.08 $ % % % % 7,8, % % U.S % Table 5 breaks down expense categories by the proportion of total operating costs which the individual expense categories represent. Real Estate Taxes and Other Taxes for suburban offices accounted for the largest portion of operating costs, 25.7 percent. Janitorial/Maintenance along with Utilities represented 25.0 percent and 23.6 percent, respectively of total operating costs. Insurance/Services and Administrative/ Benefits represent the remaining portion of total operating costs. Table 6 lists median management fees expressed as a percentage of total actual collections. Nationally, median management fees represent 3.35 percent of a suburban office property s total actual collections. The median management fees for the Pacific Coast region reported at 2.84 percent of total actual collections. Management fees in the Southeast represent 3.70 percent of total actual collections. Table 6: Median Management Fees Suburban As a Percent of Total Actual Collections Change 1,2,3 2.96% 3.16% 3.10% % 3.71% 3.70% % 3.59% 3.58% % 2.88% 2.89% ,8, % 3.47% 3.31% % 2.87% 2.84% U.S. 3.04% 3.41% 3.35% Table 7 lists the median year-end vacancy levels for suburban properties. The typical suburban office properties experienced a 2011 year-end vacancy of 11 percent. The Midwest region experienced the highest vacancy rate at 17 percent. The Northeast and Mid-Atlantic regions reported a 6 percent vacancy rate in Table 7: Median Year-End Vacancy Suburban As a Percent of Rentable Office Area Regions Change 1,2,3 6% 6% % 10% % 17% % 13% 1 7,8,10 11% 8% % 16% -3 U.S. 11% 11% 0 Table 5: Comparison of Expense Categories 2011 Suburban As a Percent of Total Operating Costs Utilities 23.6% Janitorial/Maintenance 25.0% Real Estate and Other Taxes 25.7% Administrative/Benefits 13.3% Insurance/Services 12.7% 13

3 Trends Income/Expense Analysis : Office Buildings DOWNTOWN MARKET SUMMARY Table 8 and Chart 2 summarize the median income and expenses for downtown office complexes across the nation. Nationally, total collections decreased to $20.30 per square foot of net rentable office space. The cost of operating a downtown office building decreased 1.9 percent to $9.95 per square foot of net rentable area. The most significant variance for individual expenses occurred in Administrative and Benefits, decreasing 4.9 percent from last year. Table 8: Median Income and Expenses Downtown Line Item Total Collections $21.89 $21.91 $ % Utilities % Janitorial/Maint % Admin./Benefits % Net Operating Costs* % Insurance/Services % R.E./Other Taxes % Total Operating Costs % Occupancy Levels 93% 93% 91% -2.0% *Insurance not included in Net Operating Costs 4% 2% 0% Chart 2: Cost Variations by Category 2011 Downtown Total U.S As a Percentage Increase Over 2010 Expenses 0.8% 1.4% 2.3% region reported the lowest net operating cost, $6.38, a decrease of 0.3 percent. Table 9: Median Net Operating Costs Downtown 1,2,3 $9.53 $10.25 $ % % % % 7,8, % % U.S % Table 10 indicates that median utility costs for downtown office properties rose 1.4 percent to $2.20 per square foot of net rentable area. The Central, Rocky Mountain, and Northwest region had the largest increase of 9.9 percent from 2010, to $2.11. The West Coast region experienced the largest decrease in utility costs, dropping 15.7 percent to $1.98. Table 10: Median Utility Costs Downtown 1,2,3 $2.94 $3.12 $ % % % % 7,8, % % U.S % -2% -4% -6% -4.9% -2.2% -1.9% Table 11 breaks down expense categories by the proportion of total operating costs which the individual expense categories represent. Utilities for downtown office accounted for 22.1% of total operating costs. Janitorial/Maintenance consumed the largest portion of total operating costs at 26.4 percent. Real Estate and Other Taxes account for 26.3 percent of total expenses while Administrative/Benefits accounted for 11.8 percent. Insurance/Services accounted for 12.7 percent of total operating costs. Table 9 lists the median net operating costs for downtown office complexes by geographical region. As a whole, the median net operating costs for a downtown office building decreased 0.3 percent to $7.12 per square foot of net rentable area. Office properties in the Northeast and Mid-Atlantic region reported the highest net operating costs at $9.79 per square foot, a 4.5 percent decrease from The Southeast Table 11: Comparison of Expense Categories 2011 Downtown As a Percent of Total Operating Costs Utilities 22.1% Janitorial/Maintenance 26.4% Real Estate and Other Taxes 26.3% Administrative/Benefits 11.8% Insurance/Services 12.7% 14

4 Income/Expense Analysis : Office Buildings Trends Table 12 lists median management fees expressed as a percentage of total actual collections. Nationally, median management fees represent 2.96 percent of total actual collections. The median management fees for the Central, Rocky Mountain, and Northwest region consumed 3.37 percent of a property s total actual collections. Management fees in the Pacific Coast regions were reported at 1.98 percent. Table 12: Median Management Fees Downtown As a Percent of Total Actual Collections Change 1,2,3 2.62% 2.69% 2.56% % 2.89% 3.04% % 2.65% 3.01% % 2.89% 2.96% ,8, % 3.11% 3.37% % 2.51% 1.98% U.S. 2.83% 2.88% 2.96% 0.08 Table 13 presents the median year-end vacancy levels for downtown properties. The national year-end vacancy increased to 9 percent. The West Coast region reported the highest vacancy rate at 17 percent. The Northeast and Mid-Atlantic; and Central, Rocky Mountain, and Northwest regions reported the lowest vacancies, at 5 percent. Table 13: Median Year-End Vacancy Downtown As a Percent of Rentable Office Area Regions Change 1,2,3 6% 5% % 9% % 16% % 13% 3 7,8,10 4% 5% % 17% 4 U.S. 7% 9% 2 OFFICE MARKET SUMMARY Table 14 compares the median income and expenses experienced by suburban and downtown developments surveyed this year. During 2011, downtown office properties total actual collections were 11.4 percent more than their suburban counterparts. The suburban office project is less costly to operate than a downtown building with total operating costs 16.4 percent less than those of a downtown building. All expense categories for suburban properties were less than those experienced by buildings in a downtown setting. Though the downtown properties reported higher total actual collections than suburban properties, the overall operating experience of both downtown and suburban office markets were similar as reflected by the median operating ratio (total operating costs divided by total actual collections). The median operating ratio for at a suburban development was.45 while a downtown building s operating ratio was.46. Table 14: Median Income and Expenses 2011 Downtown vs. Suburban Line Item Downtown Suburban Total Collections $20.30 $18.22 Utilities Janitorial/Maint Admin./Benefits Net Operating Costs Insurance/Services Total Operating Costs Operating Ratio* *Median from the National Reports Data Summary The Tables on the following pages provide an overview of the statistics generated from the surveys. The first column of each page describes the size of the sample in multiples of 10,000 per square feet. Key income items and expense subtotals follow across the page. All dollar figures are based on net rentable office area. For more detailed information on a particular region, city or building category, the reader should refer to the various complete reports provided for each of the sub-samples located elsewhere in this study. 15

5 National Data Summary Income/Expense Analysis : Office Buildings Table 15: Summary of Selected Downtown Reports 2011 Operating Data Median Values in Dollars per Square Foot of Net Rentable Office Area Sq. Ft. Office TAC Utility Janit./ Admin. Ins./ NOC TOC (10,000s) Rents Costs Maint. Costs Svcs. Reported United States Selected Regions Regions 1,2 & Region Region Region Regions 7,8 & Region U.S.-By Building Size 5,000-39, ,000-99, , , ,000 and Over U.S.-By Age Before U.S.-By Rental Range $1.00-$ $10.00-$ $16.00-$ $20.00-$ $25.00 and Above U.S.-By Type 1 or 2 Stories or 4 Stories Stories or More Stories Selected Cities Atlanta, GA Boston, MA Charlotte, NC Dallas, TX Houston, TX Kansas City, MO Phoenix, AZ Portland, OR Seattle, WA Washington, DC

6 Income/Expense Analysis : Office Buildings National Data Summary Table 16: Summary of Selected Suburban Reports 2011 Operating Data Median Values in Dollars per Square Foot of Net Rentable Office Area Sq. Ft. Office TAC Utility Janit./ Admin. Ins./ NOC TOC (10,000s) Rents Costs Maint. Costs Svcs. Reported United States Selected Regions Regions 1,2 & Region Region Region Regions 7,8 & Region U.S.-By Building Size 5,000-39, ,000-99, , , ,000 and Over U.S.-By Age Before U.S.-By Rental Range $1.00-$ $10.00-$ $16.00-$ $20.00-$ $25.00 and Above U.S.-By Type 1 or 2 Stories or 4 Stories Stories or More Stories Selected Cities Atlanta, GA Charlotte, NC Chicago, IL Dallas, TX Houston, TX Kansas City, MO Los Angeles, CA Minneapolis-St. Paul, MN Phoenix, AZ St. Louis, MO San Diego, CA Washington, DC

7 Graphic Income/Expense Analysis : Office Buildings Downtown- Distribution of Median Annual Income And Operating Costs 5.8% 6.2% Percentages of Total Actual Collections Net Operating Income % Janitorial, Maintenance & Repairs % Utility Expenses % Real Estate and Other Taxes % Administrative and Benefits % Insurance and Services % 12.9% 51.3% 10.8% 13.0% Comparison of Total Actual Collections and Total Operating Costs Downtown Buildings U.S. For Selected Regional Areas Based on Dollars per Square Foot of Net Rentable Office Area Regions 1,2 & ,8 & 10 9 U.S. Total Actual Collections (TAC) $40.25 $17.08 $17.94 $18.23 $17.79 $23.76 $20.30 Total Operating Costs (TOC) $15.92 $8.76 $10.26 $9.22 $9.04 $9.95 $9.95 $45.00 $40.00 $35.00 $30.00 $25.00 $20.00 TAC TOC $15.00 $10.00 $5.00 $0.00 Regions 1,2 & 3 Region 4 Region 5 Region 6 Regions 7,8 & 10 Region 9 U.S. 18

8 Income/Expense Analysis : Office Buildings Graphic Suburban- Distribution of Median Annual Income And Operating Costs Percentage of Total Actual Collections Net Operating Income % Janitorial, Maintenance & Repairs % Utility Expenses % Real Estate and Other Taxes % Administrative and Benefits % Insurance and Services % 11.7% 6.1% 5.8% 10.8% 54.2% 11.4% Comparison of Total Actual Collections and Total Operating Costs Suburban Buildings U.S. For Selected Regional Areas Based on Dollars per Square Foot of Net Rentable Office Area Regions 1,2 & ,8 & 10 9 U.S. Total Actual Collections (TAC) $27.13 $16.49 $15.09 $17.97 $17.20 $20.76 $18.22 Total Operating Costs (TOC) $9.28 $7.17 $8.18 $9.26 $7.56 $8.83 $8.32 $30.00 $25.00 $20.00 $15.00 TAC TOC $10.00 $5.00 $0.00 Regions 1,2 & 3 Region 4 Region 5 Region 6 Regions 7,8 & 10 Region 9 U.S. 19