BOMA Refocuses Spending

April 12, 2008
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GRAND RAPIDS — The report went on a surprising two-year hiatus in 1999 before returning to its usual release date in the spring of 2001 and in the six springs that followed.

Well, spring arrived this year, but the annual occupancy survey from the Building Owners and Managers Association of West Michigan didn’t — and won’t, at least for the very near future.

The season had nothing to do with this year’s survey being cancelled, a survey that local media were more likely to rely on to capture a portrait of the metro area’s office market than building owners and managers did. And that is one of the reasons the BOMA Board of Directors decided not to measure occupancy for last year.

“We took a look at it and sent a survey out to all of our members asking them various questions about the organization, and one of the questions was: Do you use the occupancy survey? Another was: Do you find it useful? The overwhelming response we got back was many of our members don’t look at it,” said BOMA President Anne Ficeli, also executive director of property management for Grubb & Ellis|Paramount Commerce.

“We spent a lot of money having it done, which is great if people find value in it. But when our members aren’t even using the information that’s there, then we start to look at what kind of value are we bringing with this,” she added.

BOMA, which is a nonprofit organization, spent about $5,000 a year to have Genzink Appraisal Co. survey the occupancy rate for 14.8 million square feet of office space located in downtown and in 13 suburban submarkets. Ficeli said members ultimately felt those dollars, which is their money, could be put to a better use.

“There are so many advocacy issues that BOMA is working on this year with the new MBT tax, with the (Michigan) Tax Tribunal and property-tax reviews, we felt that maybe we could take some of that money that we would have spent on the survey and put it toward advocacy and contribute it to the BOMA political action committee,” she said.

“Maybe that would be of more value to the building owners and managers.”

Ficeli also said that some of BOMA’s members weren’t exactly overenthusiastic about compiling how much square footage was occupied in their buildings and then getting that data, along with other information, to Genzink in a timely manner. Genzink told BOMA that it was a tough sell to get all of its members to respond to the survey.

“That was another reason. We thought maybe if we don’t do it every year, more people will be inclined to participate. The less information we get back, the less valuable it is,” she said of the annual report.

Taking a closer look at the Michigan Business Tax and the backlog of property reviews before the tax tribunal are the issues on which the BOMA political action committee will use most of the dollars that normally would have gone to the survey. Ficeli said the executive director of the Detroit BOMA chapter recently updated her group on the MBT, and the local BOMA political action committee went to Lansing a few weeks ago to speak with the tribunal.

“There are a lot of fights to be fought there. We’ve had some small wins, but no huge victories yet. So these will be on-going issues,” said Ficeli.

Lawmakers really haven’t ironed out the wrinkles yet in the MBT they approved last year. There are a number of bugs that need to be worked out before building owners, property managers and others in the real estate industry can actually feel comfortable with the levy.

“They’re still working through a lot of the technicalities of how that is going to work. They don’t even have the forms available yet for businesses to fill out. So they still have a lot of issues to work through in Lansing,” said Ficeli.

The commercial real estate industry feels the MBT is overly punitive because of the gross receipts portion of the tax. It adds a 0.08 percent tax to the total gross rents that a building owner receives, including the reimbursements an owner gets for maintaining a building’s common areas. BOMA wants that part of the tax dropped or changed to something that is more palatable to building owners.

“The owners are going to be taxed on a pass-through reimbursement that they are getting back from their tenants. That’s not really income. It’s really a straight pass-through reimbursement, and the owners are going to be charged an additional tax on top of that, that they can’t really pass through,” said Ficeli.

“It’s definitely going to affect the bottom line. Anytime you affect the net operating income of a commercial property, you’re affecting the value of that property, as well. It’s definitely a big issue for real estate owners. I think it’s something that the legislators really didn’t think through all the way. It could be something as simple as an oversight.”

Legislative issues had nothing to do with the cancellation of the report nine years ago. BOMA called a timeout back then to restructure the occupancy report from a survey to what 2001 BOMA President Joseph Zainea called a census. The change added the occupancy rates of 71 office properties that hadn’t been in the previous reports but were listed in the updated version when it was released in 2001.


A Look Back At The Last Seven

Seeing that the Building Owners and Managers Association of West Michigan decided not to do an Annual Office Occupancy Report for 2008, here are the overall occupancy rates that came from the previous seven reports.

Sector

2001

    2002    

2003

    2004    

2005

    2006    

2007

Downtown

86%

84%

83%

85%

84%

85%

86%

Suburbs

91%

83%

83%

83%

81%

83%

84%

Total Market   

88%

83%

83%

84%

83%

84%

85%

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