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By Caroline Judd

3 metrics that matter for modern property management

There are many layers to maintaining a well-run commercial real estate (CRE) property. For one, it means knowing what key performance indicators (KPIs) to track in order to gauge the success of your buildings. And with the data collected, CRE teams can make informed decisions to create buildings that stand up to competitors.  

Let us take you through three next-level metrics that are moving the needle on KPIs the CRE industry already knows and loves – net operating income (NOI), rent growth, capital expenditure (CapEx).  

How tenant satisfaction rates impact NOI 

Did you know tenant satisfaction rates can have a direct impact on growing NOI? Access to real-time data on tenant preferences and behaviors is paramount. And when this data is harnessed correctly, it can directly boost NOI.     

For example, if there is an inconsistency in what tenants say they want (sentiment) and the space and amenities they actually use (usage) throughout the year, CRE landlords can use these insights to make decisions that improve tenant satisfaction. The end result? A boost to NOI.    

Here are ways tenant satisfaction can impact your building’s NOI:   

  • Lease renewals: Tenant satisfaction is a major factor in lease renewals. Happy tenants are more likely to renew their leases, providing a steady and predictable income stream that contributes positively to NOI.    
  • Less vacancy: Satisfied tenants are less likely to leave, reducing the vacancy rate. The costs associated with vacant properties, such as marketing costs for new tenants, loss of rental income, and maintenance costs, can severely impact NOI.    
  • Reputation: Happy tenants can refer other potential tenants, reducing marketing expenses and time spent filling vacancies. Plus, a good reputation can justify premium rent prices, which can directly increase NOI.    
  • Lower maintenance and turnover costs: Satisfied tenants are more likely to take care of the property, leading to lower maintenance and repair costs. Also, with fewer tenant turnovers, costs associated with renovations or repairs between tenants are reduced.    
  • Potential for rent increases: If tenants are satisfied with their commercial space, they may be more willing to accept reasonable rent increases, especially if they feel the level of service and maintenance justifies it.    

How energy usage impacts rent growth 

It’s true, keeping track of and optimizing your property’s energy usage can lead to lower operational expenditure (OpEx) and have a positive effect on rent growth.  

For instance, JLL’s “Decarbonizing the Built Environment” report found that 63% of investors strongly agree that green strategies can drive higher occupancy, higher rents, higher tenant retention, and overall higher property value.   

Tracking and optimizing energy usage can contribute to commercial rent growth in several ways; here’s how:   

  • Increased tenant attraction: Energy-efficient buildings are increasingly attractive to tenants due to both environmental concerns and the potential for lower utility costs. As a result, these properties can command higher rents.   
  • Enhanced property value: Energy efficiency improvements can increase the overall value of a building, making higher rents more justifiable. For example, installing energy-efficient systems may result in a higher ENERGY STAR Score, which can increase the property’s appeal and market value.   
  • Corporate Social Responsibility: Many companies now have Corporate Social Responsibility (CSR) policies or Environmental, Social, and Governance (ESG) goals that include reducing their carbon footprint. Renting space in an energy-efficient building can help them meet these goals, so they may be willing to pay a premium for such spaces.   
  • Regulatory compliance: As energy regulations become more stringent, buildings that are already energy efficient will have fewer costs associated with upgrades or fines for non-compliance. These savings can be redirected toward building improvements that justify rent increases.   

How preventive maintenance impacts CapEx  

Having a better understanding of your preventive maintenance program helps you catch inefficiencies in your building before they become a major problem. And ensuring equipment is running in top shape will save your property time and money in the long run. In fact, it’s one of the main reasons why healthy preventive maintenance performance can lead to better CapEx. Here are other ways:  

  • Extended asset life: Regular maintenance can extend the lifespan of building systems such as HVAC, electrical, plumbing, elevators, etc. This defers the need for system upgrades or replacements, thus reducing CapEx.   
  • Reduces unexpected repairs and replacements: Preventive maintenance identifies potential issues before they escalate into major problems that require substantial repair or replacement. Avoiding these emergency situations can save significant CapEx funds.   
  • Planning and budgeting: A good preventive maintenance program provides better predictability about when systems or equipment will need to be replaced. This allows for improved planning and budgeting for CapEx expenses, spreading them out over a longer timeframe.   
  • Efficiency improvements: Preventive maintenance can lead to efficiency improvements in various building management systems, which may reduce the need for expensive upgrades aimed at achieving the same goal.   
  • Property value: Regular maintenance can help preserve or enhance your property’s value. This can reduce CapEx by minimizing the need for major renovations or improvements needed to attract tenants.   

Metrics that matter for modern property management 

Most CRE properties already have a set of metrics they’re tracking (and have been tracking for years). However, it’s time to step things up.  

You’ve read how metrics like tenant satisfaction rates, energy usage, and preventive maintenance can positively impact your property. But have you thought about what your property would look like if you took all your KPIs to the next level? By measuring metrics like tenant compliance rates, billback summaries, and work order completion rates, you’ll begin to set your buildings apart from the rest.  

For additional modern metrics to track at your property, along with how they’ll move the needle on the KPIs you’re already tracking, check out the free guide, “Metrics that matter for modern property management.”