Office building market recovery revs into high gear.

With the burgeoning office market recovery now fully revved up into cruising speed, downtown office buildings are the clear leaders in terms of income growth, outperforming their suburban counterparts. But suburban offices still enjoy the distinction of being less costly to operate than central business district (CBD) properties.

These are the findings of the new 1997 edition of the Income/Expense Analysis - Office Buildings, published by the Institute of Real Estate Management (IREM). The annual research survey analyzes the previous year's operating income and cost figures for almost 3,000 private-sector downtown and suburban office buildings in the United States and Canada.

In the suburban office market, median total annual collections rose to $13.58 per square foot of net rentable space in 1996, up 4.4 percent from 1995. Downtown properties reported a more robust 7.5 percent increase in collections, to $15.17 per square foot of net rentable office area. This reverses the previous year's trend, in which suburban collections increased but CBD collections declined.

Thanks to this spurt of income growth, downtown office buildings' 1996 median total annual collections were 10.5 percent higher than those of suburban properties.

For both office markets, operating expenses held steady, the IREM survey reports. At suburban buildings, median total costs rose less than 1 percent, from $6.21 to $6.26 per square foot. Similarly, the total cost of operating a CBD property increased by only 0.7 percent, from $6.90 to $6.95 per square foot.

Not only do suburban office projects continue to be more economical to operate than the typical downtown property, in 1996 total operating expenses for suburban offices were a full 10 percent less than those of their CBD equivalents. All major expense categories - including utilities, janitorial/maintenance, insurance and taxes - were slightly lower for suburban properties than for buildings in a downtown setting.

But even though downtown properties reported higher total actual collections and expenses than properties in the suburbs, the overall operating experience of both types of office buildings was nearly identical, as reflected in their operating ratios (net operating costs divided by total actual collections). The median operating ratio at a suburban development was 0.38, while the average downtown building's operating ratio was 0.37.

The IREM study also reveals that the days when "office building" was synonymous with "see-through building" are fading farther and farther into ancient history. National occupancy levels for both the downtown and suburban buildings in IREM's sample continued to rise in 1996, reaching 93 percent for CBD properties and an impressive 98 percent for suburban projects.

The Income/Expense Analysis breaks down office building financial data into several categories, including property age, size, height and rental range. National and regional reports are included, along with local metropolitan data for many major markets. The study is designed to help property owners, managers, investors, appraisers, lenders, developers and other real estate professionals evaluate their buildings' performance and prepare budgets, revenue projections, feasibility studies, etc.

The 276-page book can be purchased directly from the publisher for $230.95, plus $10 for shipping and handling. To order, contact IREM's Customer Service Department at 430 N. Michigan Ave., Chicago, Illinois 60611-4090, or call toll-free at 1-800-837-0706, extension 4405. Credit card orders (VISA, MasterCard or American Express) can he taxed toll-free to 1-800-338-4736.

IREM has also just published new 1997 editions of four other annual Income/Expense Analysis studies: Shopping Centers ($230.95), Conventional Apartments ($230.95), Federally-Assisted Apartments ($199.95) and the Expense Analysis: Condominiums, Cooperatives, and Planned Unit Developments ($199.95).

The Institute of Real Estate Management, an affiliate of the National Association of Realtors, is an association of professional property and asset managers who have met strict criteria in the areas of education, experience, and commitment to a code of ethics. Founded in 1933, IREM's mission is to educate real estate managers, certify the competence and professionalism of individuals and organizations engaged in the management of real estate, serve as an advocate on issues affecting the real estate management industry, and enhance its members' professional competence so they can better identify and meet the needs of those who use their services.