Compression in Utilities and Total Operating Expenses

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A new report from the Building Owners and Managers Association (BOMA) International and Kingsley Associates shows that property professionals are trimming building operating expenses to stay competitive in today’s challenging marketplace. The report, which analyzes data from BOMA International’s 2010 Experience Exchange Report® (EER), revealed a $0.09 (1.1%) decrease in total operating expenses for U.S. private-sector buildings during 2009.

The BOMA-Kingsley Report analyzes a control sample of buildings in the U.S., for which data was submitted in both 2009 and 2010, with minimal changes in total rentable area and occupancy. The main analysis drills down into trends based on building type, location, market, expense categories, and more. The report also includes articles on the advantages of benchmarking for industry practitioners and analyzing energy expense trends.

Key findings from the report include these:

  • In the last two years, general multi-tenanted buildings have spent about 11% less on roads and grounds expenses, while government buildings have spent about 25% less than private-sector buildings.
  • Utilities expenses saw reductions across all property types during 2009. General multi-tenant buildings trimmed $0.08 per square foot (psf) from their utility bills, while corporate facilities doubled that savings ($0.16 psf) and government buildings almost tripled their savings ($0.22 psf).
  • Fixed expenses, the large majority of which is real estate taxes, climbed more than 9% at corporate facilities and nearly 4% at medical office buildings, compared to less than 2% at general multi-tenant buildings.
  • New York City remained the most expensive in terms of total operating costs, though operating expenses overall declined more than 7% compared to 2008. Atlanta, Dallas, and Minneapolis saw double-digit decreases in total operating expenses in 2009.
  • For industry practitioners, benchmarking allows them to fine-tune building operations, build better budgets, underwrite assets and make development projections, rebid service contracts, and educate stakeholders.
  • While pressure on operating expenses may ease once the economy recovers, signs indicate that a steadfast focus on energy efficiency has become a key element of ongoing operational practice and will outlast the current market downturn.

“This BOMA-Kingsley Report is a valuable tool for industry professionals looking for an overview of the latest trends in building income and operating expenses,” commented BOMA International Chair Ray H. Mackey, Jr., RPA, CPM, CCIM, partner and chief operating officer, Stream Realty Partners, L.P.

For a PDF of the report, send a request to [email protected] with the words “BOMA-Kinsley Report” in the subject line of your e-mail.

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