Office Expenses Outpace Revenue for 5 Straight Years

Operating expenses among CMBS-backed office properties grew faster than the revenue in every year from 2021 through 2025, and the slower cost growth of 2025 still wasn’t enough to revive cash flow, according to a new Trepp report. With net operating income (NOI) barely moving throughout the period, owners heading into refinancing have little cash-flow improvement to show lenders.

Trepp’s sample changes from year to year — shrinking from 3,599 properties in 2021 to 2,266 in 2026 — so the figures reflect chained annual medians, rather than a fixed panel. Even so, the implied annualized growth rate was 2.7% for operating expenses, as compared to 1.3% for revenue and just 0.2% for NOI. Median NOI growth was negative in 2021, 2024 and 2025, leaving cash flow essentially flat throughout the five years.

Insurance and utilities drove much of the pressure: Property insurance posted the fastest implied annualized growth of any expense line at 6.1%, according to Trepp, followed by utilities at 4.9%. Meanwhile, payroll and benefits jumped 3.3%; repairs and maintenance grew 3.2%; and general and administrative costs climbed 2.7%. Notably, real estate taxes rose just 1.1% (below the revenue rate).

That said, cost growth did ease in 2025. Trepp reported that median operating expense growth slowed to 2.1% from 2.5% the prior year, while insurance growth decelerated sharply to 3.3% from 5.8%. But, utilities moved the other way, accelerating to 6.7% from 2.0%. Revenue growth also slowed, falling to 0.7% from 1.1%. That kept a 1.4-percentage-point gap between expenses and revenue for a second consecutive year and left median NOI growth at -0.4%.

The pattern held across geographies. Trepp found that expenses outgrew revenue in all seven Census divisions that met its sample threshold. The gap ranged from 0.8 percentage points in New England to 1.6 points in East North Central. Among the largest markets, Los Angeles led with 2.5% implied annualized revenue growth and 1.3% NOI growth, while Chicago was weakest with revenue down 0.7% and NOI falling 1.9%. Lastly, New York recorded 1.0% revenue growth, but -0.6% NOI growth.