5 most (and least) expensive commercial real estate markets

With an average cost per square foot of $16.11, Stamford, Conn., is the most costly U.S. market for commercial real estate, according to a new study by the Building Owners and Managers Association International. New York and San Francisco are also among the nation's priciest markets. 

Using the results from the BOMA 2013 Experience Exchange Report, the group compiled a list of the most and least expensive commercial real estate city-markets in the United States.  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. Stamford, Conn. $16.11 per square foot (psf)
2. New York $11.80 psf
3. Grand Rapids, Mich. $11.16 psf
4. Newark, N.J. $10.34 psf
5. San Francisco $9.66 psf

Five least expensive city-markets – total operating expenses:

1. Stockton, Calif. $3.57 psf
2. Fresno, Calif. $3.61 psf
3. Huntsville, Ala. $4.31 psf
4. Virginia Beach, Va. $4.64 psf
5. Albuquerque, N.M. $4.80 psf

Total operating expenses incorporate 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.  

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. 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, D.C. $44.30 psf
2. New York $39.00 psf
3. San Mateo, Calif. $34.96 psf
4. San Francisco $34.49 psf
5. Santa Monica, Calif. $34.04 psf

Five least expensive city-markets – total rental income:

1. Macon, Ga. $8.16 psf
2. Shreveport, La. $11.18 psf
3. Columbus, Ohio $12.09 psf
4. Huntsville, Ala. $12.81 psf
5. Little Rock, Ark. $12.81 psf

Total rental income includes rental income from office, retail and other space, such as storage areas. 

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.

The Experience Exchange Report is the premier income and expense data benchmarking tool for the commercial real estate industry. The EER allows users to conduct multi-year analysis of single markets and 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 at www.bomaeer.com.

About BOMA International
The Building Owners and Managers Association (BOMA) International is a federation of 93 BOMA U.S. associations, BOMA Canada and its 11 regional associations and 13 BOMA international affiliates.  Founded in 1907, BOMA represents the owners and managers of all commercial property types, including nearly 10 billion square feet of U.S. office space that supports 3.7 million jobs and contributes $205 billion to the U.S. GDP.  Its mission is to advance the interests of the entire commercial real estate industry through advocacy, education, research, standards and information.  Find BOMA online at www.boma.org.