Magazine article Journal of Property Management

A Sneak Peek at the Income/expense Analysis® Studies by Irem

Magazine article Journal of Property Management

A Sneak Peek at the Income/expense Analysis® Studies by Irem

Article excerpt

IREM released the 2016 Income/ Expense Analysis Reports for five property types: Conventional Apartments, Office Buildings, Shopping Centers, Federally Assisted Apartments, Condominiums, Cooperatives and Planned Unit Developments, along with the Metro Reports-for pro-fessionals who just need an individual metropolitan market area report-which now includes region and national data.

For over 60 years, these reports have provided the tools to plan, budget and forecast-and to enable real estate management professionals to stay one step ahead of the competition by making data-driven decisions. These benchmarking resources empower professionals to make big data work for them by delivering data from thousands of properties right at the tips of their fingertips, right when they need it.

FEDERALLY ASSISTED APARTMENTS

TABLE 1 presents some of the characteristics of this year's sample. A total of 985 properties containing 81,593 units were submitted. The typical federally assisted project contained 83 units.

TABLE 2 outlines total expenses by subsidy type. Section 236 garden buildings experienced the lowest expenses in 2015 at $4.97 per square foot. Section 202 elevator buildings reported the highest total expenses, $10.62 per square foot in 2015. Total expenses increased for all low rise subsidies over the last two years.

TABLE 3 lists net operating income by subsidy and building type. Elevator buildings reported median net operating income ranging from $6.32 to $8.00 per square foot; low-rise buildings ranging from $2.26 to $4.83 per square foot; and garden buildings ranging from $2.72 to $6.47 per square foot.

CONVENTIONAL APARTMENTS

TABLE 1 compares the 2015 sample with that of 2014. A total of 3,902 apartment projects, representing over 749,000 units, submitted information for this year's study. The typical conventional financed apartment project contains an average of 192 apartment units.

TABLE 2 lists the gross possible apartment rent by building type. Three of the four building types reported increases in gross possible apartment rent in 2015. Elevator buildings reported the highest increase in gross possible rents, 7.9 percent, raising the rent from $17.85 per square foot in 2014 to $19.26 per square foot in 2015. The rent in garden buildings increased 3.5 percent to $11.86 per square foot and low-rise buildings with 25 or more units experienced an increase of 0.3 percent to $11.74 per square foot. Low-rise buildings with 12-24 units saw no change and remained at $12.44 per square foot in 2015.

TABLE 3 reflects the net operating income experience by each building type (NOI is defined as the income remaining after operating expenses have been paid, but before expenditures for ground rent, mortgage interest and amortization, capital improvements and income taxes). Elevator buildings reported the highest NOI, rising 4.5 percent to $11.17 per square foot. Low-rise buildings with 1224 units reported the lowest NOI at $5.27 per square foot in 2015, but saw the largest increase of 6.9 percent. Low-rise buildings with 25 or more units reported an increase of 2.2 percent at $5.91 per square foot in 2015. Garden buildings reported an increase of 5.2 percent at $6.51 per square foot in 2015.

TABLE 4 presents the median vacancies and rent loss experienced by each building type (median vacancies and rent loss are expressed as a percentage of gross possible income). Uncollected income due to vacancy and other forms of rent loss varied very little compared to 2014. All four property types changed less than 1 percent. Overall, garden buildings had the highest vacancy and rent loss reporting at 5.7 percent of gross possible income. Lowrise buildings with 12-24 units reported the lowest vacancy and rent loss of the four property types at 4.6 percent.

TABLE 5 shows the median amount of all expenses per square foot by building type. Elevator buildings were the most costly to operate and experienced an increase of 1. …

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