A new report from Yardi Matrix documents the rapid rise in operating expenses for multifamily properties over the past year and identifies the factors driving this rise.
The broad view
Nationally, Yardi Matrix found that average annual per-unit operating expenses were $8,694. These expenses had risen 9.3 percent, or $740, in the 12 months to June 2023. This compares to Yardi Matrix’s earlier report that national average apartment rents grew 1.8 percent year-over-year to June, reaching $1,726 per month. The new report said that operating expenses were 43 percent of gross revenue.
Yardi Matrix found that the fastest growing expense was for insurance, with a national average year-over-year increase of 18.8 percent to June. This was followed by repairs and maintenance at 14.2 percent, administrative expenses at 11.8 percent, payroll at 7.8 percent, utilities also at 7.8 percent, management at 7.2 percent, taxes at 5.9 percent and marketing at 4.9 percent.
Insurance expenses rose fastest in cities in the Southeast driven by damage from recent storms. Rates nearly doubled in Huntsville, Ala, and were up over 50 percent in Mobile, Ala., Wilmington, N.C., Pensacola, Fla., and Birmingham, Ala.
Catching up
The report also examines regional data and finds large differences in operating expenses and their rates of growth. Generally, the fastest rates of expense growth are found in the regions where the levels of expenses are the lowest.
Annual operating expenses were highest in the Northeast region at $11,251 per unit, but this region had the lowest rate of expense growth at 5.5 percent. The highest rate of expense growth was seen in the Southeast region, which had the second lowest annual expense level at $8,141. The anomaly was the Midwest region which had the lowest level of annual operating expenses but the second lowest rate of expense growth.
The regional operating expenses and expense growth are shown in the table below.
| Region | Annual expense per unit | YoY expense change |
| Northeast | $11,251 | 5.5% |
| West | $9,325 | 9.0% |
| Southwest | $8,144 | 10.3% |
| Southeast | $8,141 | 11.0% |
| Midwest | $7,635 | 8.3% |
On a metro level, the differences in operating expenses are even more extreme. The metro with the highest annual expenses was New York with expenses of $18,484. These expenses were almost 50 percent higher than those of the number 2 metro, San Francisco, at $12,468. However, the New York metro was the only one listed in the report where operating expenses fell in the 12 months to June 2023, with a drop of 1.5 percent.
The locale with the lowest annual multifamily operating expenses was northwest Arkansas, with expenses of $4,518 per unit per year. Expenses there rose 16.2 percent in the 12 months to June 2023. The large metro with the lowest annual operating expenses was Las Vegas with expenses of $6,136. Expenses there rose about 11 percent.
Yardi Matrix gathered data from 20,000 properties using Yardi software in preparing this report. The full report contains data on more metros. It is available here.
