Multifamily operating expenses rose about 2.7% in 2019 based on the experience of the six largest multifamily REITs.

For comparison, 2019's inflation rate was 2.3% based on the December CPI.

While REITs are not totally representative of the broader multifamily market, their experience provides a useful snapshot.

REITs have economies of scale that should suggest more control over expenses, while they also have to provide a superior product in a competitive landscape, suggesting that controlling expenses may be challenging.

Of the major categories, insurance rose the most with an 8.7% rise in 2019. Real estate taxes climbed 3.6%.

While higher than the 2019 inflation rate, property owners were relatively successful at limiting real estate tax gains. MAA’s 2020 guidance included the expectation that sustained increases in real estate taxes would put upward pressure on their operating expenses.

Utilities increased only marginally (0.1%). A few REITs experienced declines, quite likely through expanded usage of energy-efficient systems.

The REITs also experienced only modest increases in repairs and maintenance expenses (1.6%).

Of the three REITs reporting on personnel/payroll expenses, increases were lower than the labor-shortage marketplace suggested they would be: only 1.9%. Many properties are implementing more technology to replace services formerly provided by personnel.

Expenses are expected to trend up in 2020. Collectively, the REITs anticipate an approximate 3.2% rise in 2020 up 50 basis points from 2019's increase.

RB 104 - 2019 Operating Expenses_Figure 12


RB 104 - 2019 Operating Expenses_Figure 22

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