What are lenders estimating for operating expense ratios on industrial manaufacturing property?

I have seen ranges from 7-12% for properties charging NNN leases
In Market Conditions - Asked by Teresa T. - Jun 12, 2013
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Answer(s)

Patrick K.
Broker/Agent
Cypress, TX

Lenders don't estimate operating expenses. You or your broker will know based on other similar properties. Property tax rates are available from your appraisal district, insurance cost based on replacement value comes from any commerical carrier. The lender could require a maintenance reserve for parking lot, roof, AC etc and that can vary given your location.

Jun 12, 2013
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James J.
Lender/Mortgage Broker
Portland, OR

Its on a case by case basis depending on the way the leases are structured. For example, you indicate that it is NNN, but there could be common area maintenance charges for the park as well. Also, are the expenses paid directly by the tenant, or are they paid by the landlord with a reimbursement by the tenant. The important thing is to figure this out so that the net income is correct.

Jun 21, 2013
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Glen W.
Lender/Mortgage Broker
Atlanta, GA

Interesting question. There are a number of factors I use when evaluating a building (I am a lender). The amounts will vary wildly depending on each property. Many times people say buildings are NNN when in fact they are some sort of modified NNN lease (for example there might be one water meter for the whole property or some common areas that are not billed back). So long story short, there is no quick and hard rule on expense factors (typically a management fee is not billed back in NNN and that could run 2-5%, but the rest of the assumptions are building specific).

Mar 6, 2014
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