Commercial real estate operating expenses : an analysis of office operating expenses using NCREIF property level data

How do the various categories of operating expenses for institutional grade office buildings vary with changes in rental income and occupancy? The general consensus held is that, following the linear relationship that exists between variable expenses, occupancy and income; a change in either occupancy or income would result in a change in variable expenses. The question is by how much and in what direction? This thesis contributes to answering that question by exploring how tax, utility, insurance and maintenance expenses for office properties, across key markets in the United States, vary with rental income and occupancy level changes. To achieve this, time-series data on income and expense data for office properties from Q1 2000 to Q4 2014 was analyzed using two panel regressions. One with fixed effects for buildings to exclude all idiosyncratic characteristics of properties and another with fixed effects for time that captured the building differences. The analysis shows that the elasticities of these expenses to changes in income and occupancy vary across expense type and also across geographic location. Additionally, in majority of the cases, these elasticities were statistically significant.

Department dc:contributor.department

Massachusetts Institute of Technology. Center for Real Estate. Program in Real Estate Development.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2015

Author dc:creator

• Owusu-Opoku, Peter K

Advisor dc:contributor.advisor

• William C. Wheaton.

• Center for Real Estate. Program in Real Estate Development.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/101323

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/101323