Property operating costs, as a percentage of gross income, continued their upward trajectory in 2023, exerting pressure on property owners’ net income.
Total operating costs, as a percentage of gross income, rose by 60 basis points to 43.10% by yearend. This deterioration in the gross cost-to-income ratio stemmed from an 11.8% increase in total operating costs, outpacing the 10.8% growth in gross income.
The primary driver of overall cost growth was the office sector, where total costs surged by 12.5% followed closely by a significant 11.5% increase in retail costs. Conversely, the industrial property sector experienced a more subdued growth in operating costs, registering a modest 4.6% increase. The growth in gross income was propelled predominantly by higher tenant recoveries, overshadowing the growth in contractual base rentals.
As in previous years, property rates and electricity were among the main drivers of cost growth.
In 2023, the Building Fabric Maintenance category overtook electricity costs as the second biggest driver of overall operating costs. Building Fabric Maintenance includes the cost of diesel for generators, and it was the fastest growing of the operating costs at 45% year-on-year which translated into a 3.4% contribution to the overall growth of 11.8%.
For more detailed information on SA’s operating costs during 2023, download a free copy of the latest report here (free to SAPOA members only).
How to access SAPOA’s reports:
- Visit www.sapoa.org.za.
- Login/register on SAPOA Members
- Click on ‘Reports’
- Click on ‘Free Reports’
- Click on ‘Office Vacancy Reports’
Not a SAPOA member? Sign up here
