BOMA identifies top five most and least expensive commercial real estate markets [updated by BOMA 8/27]

by Brianna Crandall — August 26, 2013—The Building Owners and Managers Association (BOMA) International, using the results from the 2013 Experience Exchange Report (EER) , has compiled a list of the most and least expensive commercial real estate city-markets in the United States [with updates published 8/27; updated figures appear in the lists below]. The annual report aggregates rental income and operating expense figures from the previous year; in 2012, data was gathered from more than 5,300 buildings across 250 markets and 115 cities in the United States and Canada.

Five most expensive city-markets (Total operating expenses):

  1. New York, NY ($11.80 psf)
  2. San Francisco, CA ($9.66 psf)
  3. Washington, DC ($9.51 psf)
  4. Santa Monica, CA ($8.54 psf)
  5. San Jose, CA ($8.47 psf)

Five least expensive city-markets (Total operating expenses):

  1. Salt Lake City, UT ($4.87 psf)
  2. Atlanta, GA ($5.57 psf)
  3. Phoenix, AZ ($5.60 psf)
  4. Cincinnati, OH ($5.69 psf)
  5. Nashville, TN ($5.69 psf)

BOMA defines total operating expenses (used above) as incorporating all expenses incurred to operate office buildings, including utilities, repairs and maintenance, roads and grounds, cleaning, administration and security. Fixed expenses include real estate taxes, property taxes and insurance. In Stamford, Connecticut, average total operating plus fixed expenses were $16.11 per square foot (psf), while they averaged just $3.57 psf in Stockton, California. There was a 3.9 percent overall decrease in total operating expenses from 2011 to 2012, underscoring an industry focus on maximizing building efficiency in the face of dwindling income streams, BOMA points out. For example, New York, which topped the list of most expensive markets for operating expenses last year, saw a decrease of $0.66 per square foot.

Five most expensive city-markets (Total rental income):

  1. Washington, DC ($44.30 per square foot)
  2. New York, NY ($39.00 psf)
  3. San Mateo, CA ($34.96 psf)
  4. San Francisco, CA ($34.49 psf)
  5. Santa Monica, CA ($34.04 psf)

Five least expensive city-markets (Total rental income):

  1. Columbus, OH ($12.09 psf)
  2. Tucson, AZ ($13.86 per square foot)
  3. Saint Louis, MO ($14.51 psf)
  4. Cincinnati, OH ($16.35 psf)
  5. Atlanta, GA ($16.89 psf)

Total rental income is defined as including rental income from office, retail and other space, such as storage areas. While Macon, Georgia, had a total rental income per square foot of $8.16, on the opposite end of the spectrum, Washington, DC, averaged a total income rate of more than five times that amount at $44.30. While average rental income has dropped somewhat, decreasing 2.9 percent from 2011 to 2012, building owners and managers are compensating for these income losses with greater reductions in expenses, says BOMA.

The Experience Exchange Report offers income and expense data benchmarking for the commercial real estate industry. The EER allows users to conduct multiyear analysis of single markets and to select multiple cities to generate state and regional reports. It also offers the capability to search by building size, height, age and more for broader analysis. Subscriptions are available from the BOMA Web site.