HOUSTON – (Realty News Report) – The devil, they say, is in the details, and no one is more aware of that than Bill Brownfield.
Bill Brownfield, together with CPA Larry Mayerhofer, co-authored The Escalation Handbook for Office Buildings, first published by the Building Owners and Managers Association (BOMA) in 1991. The handbook remains a trusted resource for property managers, accountants and building owners because it clarifies a complex topic that often accounts for 15% to 50% of income in multi-tenant office buildings. Realty News Report spoke with Brownfield about the book’s continued relevance, the strategy behind Alpha Office Escalations (AOE), and what he expects for Houston’s office market in the coming years.
Realty News Report: You’ve worked in the Houston office market for years. How would you describe landlord sentiment as we move into the fourth quarter?
Bill Brownfield: In Houston we’re seeing two distinct outlooks, especially in the CBD and in certain suburban concentrations. Owners of the newest Class A+ buildings are investing heavily in amenities and services—approaching hospitality-level offerings—to attract top-tier tenants. These owners are well-capitalized, enjoy market momentum, and draw tenants willing to pay premium rents for live/work/play environments. By contrast, owners of older Class A and Class B buildings—who represent the majority—are increasingly treated as commodity space and must compete largely on price. Many of them need fresh capital to reposition properties just to remain competitive. Compounding this are rising property taxes and softer demand from the oil and gas sector. It’s a competitive market: nearly a quarter of office inventory is vacant, and even positive trends like population and job growth aren’t fully offsetting the negatives.
Realty News Report: What about other markets?
Bill Brownfield: Our work is national. Most of our online clients are in Sunbelt and coastal cities, where steady population and job growth help sustain demand. Those markets also face rising costs, but many remain cautiously optimistic that their economies will continue to expand.
Realty News Report: You’re a best-selling author—your Escalation Handbook is now in its third edition. How did it begin?
Bill Brownfield: It started simply—on a napkin at my kitchen table. In the 1980s many believed the lease “gross up” provision unfairly allowed landlords to collect more than actual operating expenses. I sketched a chart to test that idea and discovered it wasn’t true. What began as a training tool for our property managers evolved into a book. BOMA published it in 1991, and it’s remained in print since. Larry Mayerhofer, my co-author on the third edition, expanded the book from a training guide into a full escalation billing methodology. As a CPA who ran national property accounting for Equity Office Properties, Larry applied the handbook’s approach to create a billing system at scale. The methodology became an industry standard, and our next step was to automate escalation billing with a cloud-based SaaS product.
Realty News Report: How many copies have you sold?
Bill Brownfield: Many—thousands over nearly three decades, though BOMA manages sales and we don’t track exact totals. We do receive modest quarterly royalties. Over the years I’ve seen well-worn and even copied editions, which tells me the industry valued having a consistent, practical approach. Our aim was always to create a standard method for escalation calculations, and now we’re focused on automating that process with Alpha Office Escalations. A byproduct of accurate automation is stronger trust between landlords and tenants.
Realty News Report: Does the book still resonate?
Bill Brownfield: Yes. It’s rare for a business book to remain relevant so long. I think that’s because professionals recognize how complex escalations are and how easily errors can occur in billing. Most people in this field want to do right by the lease terms they administer, so they actively seek reliable guidance to improve accuracy.
Realty News Report: For readers unfamiliar with office leasing, how would you define escalation clauses?
Bill Brownfield: Escalations determine each tenant’s share of a building’s operating expenses. While the concept is simple, applying it is complicated because each lease is negotiated separately and contains unique provisions affecting landlord and tenant obligations. The strength of our system is its flexibility—it captures nearly all of those individualized lease terms.
Realty News Report: Can you describe Alpha Office Escalations briefly?
Bill Brownfield: AOE is a billing platform that automatically and accurately calculates each tenant’s share of operating expenses according to each lease’s specific terms, expense caps and capital amortizations. Users upload expenses, enter lease economics and define expense pools; AOE completes the calculations and produces invoices. Beyond simple billing, the structured input reduces calculation errors common in custom Excel schedules and offers more than 20 reports to support audits. It also quantifies how much operating expense owners subsidize due to vacancies and provides data to improve financial outcomes.
Realty News Report: Have you noticed any new clauses or trends in recent leases?
Bill Brownfield: The core legal language around operating and capital expenses hasn’t changed materially in decades, which suggests those clauses are fundamentally sound. However, negotiable definitions of what tenants pay do change from lease to lease. Recently there’s been more language allocating costs for new amenities—fitness centers, concierge services, conference facilities and their staffing—since these services benefit tenants and landlords aim to recover those costs through pro rata allocations.
Realty News Report: Are free rent offers still common in Houston?
Bill Brownfield: Free rent is still part of the market, and landlords often extend lease terms to match free months. Tenant improvement allowances are also rising as landlords compete for desirable tenants; some landlords effectively act like lenders by rolling extra improvement costs into higher rents or longer terms. These concessions will likely persist until overall occupancy improves significantly.
Realty News Report: Any plans for a fourth edition of the handbook?
Bill Brownfield: Not until there are major changes in lease language or structure. Our current focus is expanding the AOE subscriber base. AOE fills a niche that larger property accounting systems don’t handle well. When those companies eventually address escalations, we plan to collaborate to ensure escalation invoices are accurate.
Realty News Report: Finally, any predictions for real estate or the economy as we approach 2020?
Bill Brownfield: The office sector has weathered many challenges—the Y2K scare, the Great Recession, multiple oil downturns—and I expect it will navigate current headwinds too. Today’s concerns include trade tensions, higher construction costs, rising property taxes, fluctuating oil prices, and uncertainty about how technology will change office use. Still, growth, creativity, property conversions and access to capital tend to resolve many issues. Houston and Texas possess strong supplies of each, which bodes well for the industry’s resilience.
Oct. 29, 2019 Realty News Report Copyright 2019