Magazine article Journal of Property Management

TRICKS OF THE TRADE: Highlights from the Income/Expense Analysis® Studies by IREM

Magazine article Journal of Property Management

TRICKS OF THE TRADE: Highlights from the Income/Expense Analysis® Studies by IREM

Article excerpt

[EXCERPT]*

The Income/Expense Analysis studies-providing data for five properties types: Office Buildings; Conventional Apartments; Shopping Centers; Federally Assisted Apartments; & Condominiums, Cooperatives, & Planned Unit Developments-have been a valuable resource for over 58 years now. Designed to help property owners and managers, investors, appraisers, lenders, developers and other real estate professionals evaluate and optimize a building's performance, the series is an invaluable resource for building better budgets, identifying ways to trim waste, addressing inefficiencies while making needed improvements, preparing feasibility studies, appraisals and loan requests, and much more. The following displays the highlights of the five publications.

?PICTURED IS ONE OF THE INCOME/EXPENSE ANALYSIS PUBLICATIONS ON FEDERALLY ASSISTED APARTMENTS. THIS IMAGE DOES NOT ILLUSTRATE THE REMAINING FOUR BOOKS IN THIS SERIES.

OFFICE BUILDINGS

The Income/Expense Analysis: Office Buildings research study, conducted by IREM since 1976, analyzes operating income and costs for 1,929 privatesector office complexes-some containing multiple buildings-in major metropolitan areas and regions in the United States and Canada. For the third consecutive year it also contains financial data, broken out separately, for 374 medical office buildings.

OFFICE BUILDING HIGHLIGHTS

* Total collections for suburban office complexes nationwide in 2012 increased 2.2 percent from 2011 levels to $18.62 per square foot of net rentable area. Similarly, downtown properties experienced a 1.9 percent year-to-year collections increase to $20.68 per square foot.

* Total operating costs for suburban buildings in 2012 increased a mere 0.2 percent from the prior year to $8.34 per square foot of rentable area, while those for downtown properties rose 1.4 percent to $10.09 per square foot.

* Nationally, net operating costs for suburban buildings in 2012 dipped 1.0 percent to $5.97 per square foot of rentable area, whereas those for downtown properties increased a mere 0.7 percent to $7.17 per square foot.

* The national vacancy rate for suburban properties in operation for 12 months was 10 percent in 2012, down 1.0 percent from the prior year. Downtown properties experienced an 8 percent vacancy rate, down from 9 percent in 2011.

CONVENTIONAL APARTMENTS

The Income!Expense Analysis: Conventional Apartments is designed to help real estate professionals evaluate multifamily development and investment options and compare their buildings' performance to industry norms.

The data for each sample is presented in dollars-per-square-foot of rentable area and as a percentage of gross possible income and dollars per unit. Individual metro market reports for more than 150 cities also are included along with an analysis of vacancy rates and operating unit trends plus a variety of historical trend reports. The study also summarizes data by building type, age, Section 42 properties, turnover and more.

CONVENTIONAL HIGHLIGHTS

* NOI for elevator buildings increased 12.3 percent to $9.92 per square foot; NOI for garden apartments rose 4.2 percent to $5.16 per square foot; NOI for low-rise buildings with 25 or more units rose 1.5 percent to $4.89 per square foot; and NOI for low-rise buildings with 1224 units declined 4.9 percent to $5.07 per square foot.

Looking at gross possible rents, low-rise buildings with 25-plus units reported the highest increase, 4.0 percent, raising the rent per square foot to $10.47. Low-rise buildings with 12 to 24 units reported a rent increase of 3.1 percent to $11.79 per square foot; elevator buildings reported a 2.6 percent rent increase to $16.83 per square foot; and garden buildings reported a 1.6 percent gain to $10.57 per square foot.

In terms of expenses, all four building types analyzed were more costly to operate in 2012. Elevator building expenses rose 2. …

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