Operating Expense Ratio
The operating expense ratio is a property's operating expenses divided by its effective gross income. Typical ratios run roughly 35–45% for multifamily, 40–50% for office, and lower for triple-net retail or industrial where tenants bear most costs. Lenders flag ratios far outside these bands as understated expenses or mismanagement.
Underwriters use expense ratios as a sanity check on the owner's pro forma: an apartment building claiming 25% expenses will be re-underwritten to market norms, cutting NOI and loan proceeds.
Lease structure drives the ratio — a gross-lease office building carries expenses a triple-net property passes through to tenants — so comparisons only work within the same lease type.