There’s good news and bad news for employers that own one or more buildings.
The good news is owners are turning a profit across the board.
From 2012 to 2013, total rental income for commercial facilities increased from $25.53 to $27.38 for office rentable square footage “per square foot” or psf).
Why the surge? The 2014 Building Owners and Managers Association (BOMA) Experience Exchange Report (EER) says tenants are demanding more repairs, maintenance, cleaning and security services from tenants. BOMA estimates tenant-driven expenses account for two-thirds of the increase in facility profitablility.
Even more good news for corporations
Total operating expenses for facilities increased for most sectors in 2013.
The lone exception: corporate facilities. Total expenses barely budged for corporations, with a 0.6% increase between 2012 and 2013.
On the other end of the spectrum, medical office buildings saw a whopping 15.3% increase in expenses.
Whoever’s paying the bills is getting hit the hardest
Now here’s the bad news: Operating expenses keep going up. Chances are you’ve noticed the costs for running and maintaining your building keeps going up ever year.
EER stats bear that out:
- Utility costs rose from $2.10 psf in 2012 to $2.15 last year
- Repairs/maintenance jumped from $1.87 psf to $1.96
- Administrative costs rose from $1.46 psf to $1.53
- Cleaning costs increased from $1.37 psf to $1.45
- Security rose from $0.69 psf to $0.73, and
- Roads and grounds upkeep increased from $0.18 psf to $0.21.
Companies in the private and public sector can count on rising utility rates for the foreseeable future.
Reason: Coal-fired power plants are closing or planning to shut down at a faster pace than the Department of Energy predicted two years ago.
That’s because air emissions regulations enacted by the Environmental Protection Agency are proving too expensive for coal-fired units to keep producing electricity.
The booming natural gas and oil industry should eventually fill the void. But as coal use declines, you can count on energy prices spiking.
Your best bet may looking at a variety of energy-efficiency improvements. The most common examples: retrofitting lights, upgrading heating and air-conditioning units and installing motion sensors for sinks, toilets and lighting.
