Making The Numbers

Work - Or Can We?

By Mark Hulsey (not AI)

It’s all about the numbers, and there’s a lot of them in what we do. And they're all tied to one of the many CRE acronyms: IRR, LTV, NOI, RSF, PGI, Cap, DSCR, USF, CAM…

But there’s one acronym that’s killing us today: OER.

Yep, OER or Operating Expense Ratio is having a tough time with the cost of doing business today. FYI: OER = a portion of a property’s revenue consumed by day-to-day operating costs before debt service.

It’s simply this… the total costs for running a building today are simply too expensive! The same pain we feel from rising costs at the gas pump or grocery store, or better yet, paying our tax bill is killing the return on many commercial investments.

At Results Commercial, we’re lucky enough to run detailed financial analysis on buildings nearly every day from industrial and retail, to office and multifamily. (Sounds like fun, doesn’t it?) And we’re seeing a trend that’s become a major obstacle: Operating Costs Are Out of Control!

Part II Continues Below...

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Making The Numbers

Work - Or Can We?

Part II, Continued From Above...

Commercial real estate investing has always been a game for the well-capitalized investor. But it doesn’t matter if the building is owned by a small owner-operator or an institutional investor (aside from NNN assets), out-of-control operating costs are killing the bottom-line.

We all know property taxes are strangling many owners in many markets. But also, just look at the basic monthly bills like heating & cooling, maintenance, refuse removal, or water & sewer. Then, add in the ridiculous cost of property insurance. Now, imagine hiring contractors for that Class A build-out or how about that recourse loan that's going to reset at today’s interest rates… you get my point.

But here’s what all of that does to the OER. In multifamily, for example, we might expect to see a 45-55% OER (up from a decade ago). However, as we do our analysis getting ready to list properties to sell for our clients, we see OER as high as 85%! Crazy high numbers that squeeze NOI to zero or even less than zero! Plus, sometimes these properties have professional management in-place. Clearly, something’s not working right.

Part III Continues Below...

Sarah's Scramble

Results Commercial Brokers Hayden Hulsey, CCIM, Dave Long, and Nolan Pratumwon had an blast at the 2026 Sarah's Scramble! The annual golf outing is presented by the Reidell-Estey Foundation. The proceeds of the event support kidney disease awareness and funding research.

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Pay It Forward

Mark Hulsey & Results Commercial along with a few friends and colleagues raised money (GoFundMe) for a specially designed running wheelchair they donated to two sisters in Massachusetts. Megan has been pushing Maive since they were little girls in local races, but their wheelchair desperately needed replacing.

We were thrilled to give them a brand new Hoyt Racing Wheelchair with the help of generous industry donors including John Findley from Javelin Environmental and Ryan O’Neill. Big thanks to John, Ryan, Results Commercial Brokers, AdaptX and all of our donors!

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Making The Numbers

Work - Or Can We?

Part III, Continued From Above...

So, what’s all this mean? It’s simple, it drives the disposition value way, way down. Why? We can’t underwrite to it or more importantly, a lender cannot underwrite for a new loan without making many Buyers and Sellers quite angry by the time they actually understand what’s really going on with the asset’s dreadful performance.

So, what’s the solution? Lower the price? Increase the rents? Improve efficiencies? Sell? Hold and improve? Or just give up? (Okay, giving up isn’t an option!)

Listen, this isn’t a fun topic, but it’s reality today. There are answers to these questions, but everyone needs to understand that high costs come at a high cost. Someone’s got to pay.

We’re here to help sort through all of this and more. At Results Commercial, we make the complex simple and lay out all of the options for our clients. Just call or drop us an email anytime – we’re happy to help.

Mark

Mark Hulsey

Managing Broker

Licensed: MN, WI & FL

mark@resultscommercial.com

Mobile: 651-755-2068

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