by Brianna Crandall — October 24, 2016 — The Building Owners and Managers Association (BOMA) International, using the data found in its 2016 Office Experience Exchange Report (Office EER), has compiled a list of the most and least expensive office markets in the United States, both in terms of operating expenses and rental rates.
The annual Office EER aggregates office sector income and expense data from the previous year; 2015 data was gathered from more than 5,200 buildings in nearly 275 markets in the United States and Canada representing almost 900 million square feet.
Total operating expenses
Total operating expenses incorporate all expenses incurred to operate office buildings, including utilities, repairs and maintenance, roads and grounds, cleaning, administration and security.
Washington, DC’s Maryland suburbs are new to the list of most expensive office markets for operating costs, while the other four markets have appeared in the top five markets for three years running. The inclusion of both Washington, DC, and the city’s Maryland suburbs indicates the particular economic strength of the Washington metro area.
Also of note, New York returned to the top of the list after being bumped last year by San Francisco. New York’s average total operating expenses of $11.94 per square foot (psf) increased from $11.46 per square foot in 2014. At the opposite end of the spectrum, Huntsville, Alabama, at $4.15 psf, replaced Cincinnati in 2015 as the market with the lowest reported operating expenses.
| Five Most Expensive Office Markets – 1. New York, New York 2. San Francisco, California 3. Washington, D.C. 4. San Jose, California 5. Washington, D.C.’s Maryland Suburbs |
Total Operating Expenses: $11.94 per square foot (psf) $10.44 psf $10.39 psf $9.74 psf $9.60 psf |
| Five Least Expensive Office Markets – 1. Huntsville, Alabama 2. Salt Lake City, Utah 3. Nashville, Tennessee 4. Dallas, Texas 5. Charlotte, North Carolina |
Total Operating Expenses: $4.15 per square foot (psf) $5.27 psf $5.44 psf $6.18 psf $6.22 psf |
Click to enlarge image.
Total rental income
Total rental income includes rental income from office, retail and other space, such as storage areas. The gap between the most expensive and least expensive office markets increased slightly in 2015.
With an average total rental income per square foot of $44.66, New York was more than three times as expensive as Indianapolis, which came in at $12.90 psf. The Washington, DC, metro area was also prominent on this list, although at $44.64 psf, the District of Columbia remains significantly more expensive than its Maryland suburbs, which saw average rental incomes of $30.84 psf.
Indianapolis took the top spot for least expensive market despite having not appeared on the list until this year.
| Five Most Expensive Office Markets – 1. New York, New York 2. Washington, D.C. 3. San Francisco, California 4. Boston, Massachusetts 5. Washington, D.C.’s Maryland suburbs |
Total Rental Income: $44.66 per square foot (psf) $44.64 psf $41.47 psf $33.03 psf $30.84 psf |
| Five Least Expensive Office Markets – 1. Indianapolis, Indiana 2. Huntsville, Alabama 3. Nashville, Tennessee 4. Detroit, Michigan 5. Saint Louis, Missouri |
Total Rental Income: $12.90 per square foot (psf) $13.56 psf $15.62 psf $15.63 psf $16.26 psf |
The Office EER provides critical insight into the performance of the office sector. With extensive historical information, the Office EER allows subscribers to conduct multi-year analysis of single markets, as well as generate customized reports based on various building characteristics and property types, such as medical office buildings, corporate facilities and government buildings. Reports are easily downloadable as both Excel and PDF documents, and there is no limit to the number of reports users can generate.
BOMA also provides a subscription to its Industrial Experience Exchange Report (Industrial EER) to help users compare how their industrial property’s rental rates compare with what the local competition charges.
