Operating Expense Ratio: The Red-Flag Check
OER is the fastest sanity check on a CRE operating statement — and one of the three weighted dimensions in our CREDDS distress detection model.
The Formula
Asset-Class Benchmarks
- Self-Storage: 25–35%
- Industrial / NNN: 5–15% (landlord nets very little OpEx)
- Modern Multifamily: 35–45%
- Class B/C Multifamily: 45–55%
- Office (gross): 45–55%
- Retail (gross): 30–40%
- Full-Service Hotel: 65–75%
Why It's a Distress Signal
An OER 10+ points above its asset-class norm is rarely benign. Common causes: deferred capex catching up, mismanagement, unfavorable service contracts, or revenue erosion (the denominator falling faster than expenses). Each is a value-add opportunity for the right buyer.
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Input EGI and OpEx, see your OER vs asset-class norms instantly.
Open OER Calculator →Frequently Asked Questions
What is the Operating Expense Ratio?
OER is total operating expenses divided by effective gross income. It measures how efficiently a property converts revenue into NOI. Lower is better.
What is a good OER by asset class?
Self-storage 25–35%, modern industrial 30–35%, multifamily 40–50%, office 45–55%, retail (gross) 30–40%, full-service hotel 65–75%. An OER 10+ percentage points above asset-class norms signals operational distress.
How does OER relate to NOI?
NOI = EGI − OpEx. OER = OpEx ÷ EGI. They are two views of the same data — OER as a percentage, NOI as a dollar amount. OER is more useful for benchmarking across properties of different sizes.