Office Expenses Outpace Revenue Growth Since 2021
According to Trepp's analysis of office properties backing CMBS loans from 2021 through 2025, operating expenses have consistently outgrown revenue in every year. The median implied annualized growth rate for operating expenses was 2.7%, compared to just 1.3% for revenue and a mere 0.2% for net operating income (NOI). This trend has led to negative NOI growth in both 2024 and 2025, signaling financial strain on office properties. The largest expense increases were seen in property insurance at an annualized rate of 6.1%, followed by utilities at 4.9%. Despite a slight slowdown in operating expenses from 2.5% to 2.1% between 2024 and 2025, the gap with revenue growth remained significant—1.4 percentage points for two consecutive years. The number of properties tracked also declined over this period. The report highlights that even as expense growth has slowed slightly in some categories like insurance (from 5.8% to 3.3%), utilities have surged sharply, adding further pressure on cash flow. This trend limits refinancing capacity and underscores the ongoing challenges for office property owners.
Topics: CMBS loans NOI decline Office expenses Revenue growth