Current Industrial Operating Expense Trends
2011 proved to be a better year for Tucson industrial property owners than the previous year. Occupancy levels were up: The average occupancy percentage for PICOR's managed industrial portfolio of 1.5 million square feet (sf) for 2011 was 78%, up from 71% in 2010. Property managers continue to operate their properties with a sharp eye to the bottom line, without sacrificing service levels. Pricing from service vendors has remained constant, and we have continued to leverage PICOR's buying power in the market to benefit owners and tenants of Tucson commercial real estate.
Comparing the 2011 expenses to 2010, expenses remained constant overall in 2011 holding at $.23 psf per month. With larger expenditures such as roof coating and parking lot sealcoating put on hold for the last three years, some property owners moved forward and completed those needed improvements in 2011. Those expenses are included in the Repairs & Maintenance and Roads & Grounds categories on the chart. Utilities, Real Estate Taxes and Insurance costs held steady in 2011 over 2010.
Rent delinquencies overall for industrial properties are down. Businesses are not reporting stellar numbers, but appear to be more grounded and optimistic about the future. Many of our current tenants have expanded, or are in the midst of expansion planning, which accounts for a good portion of the increase in occupancy for 2011.
The mood in the market remains “cautiously optimistic,” which is a term that can be applied both to tenants and to landlords who have weathered the worst of times. As the market improves, landlords and property managers who provide exceptional service to their tenants, including diligence in keeping expenses in check and a deeper understanding of their businesses, will be the winners in retaining their tenants in the future.
Eileen M. Lewis, RPA FMA leads PICOR’s property management division and is one of 13 principals. A long-time Tucsonan and 26 year veteran of the commercial real estate industry, Eileen has managed a portfolio of industrial, retail, and office buildings for private and institutional investors and served as Receiver for distressed assets. An active industry leader locally and nationally, she has served the Building Owners & Managers Association (BOMA), Commercial Real Estate Women (CREW) and others.
Photo source: Gary Rumack Photography