To make sure you are getting the best return on your investment as an industrial property owner, it is essential to assess the financial performance of your property. Among other things, industrial properties include factories, warehouses, production facilities, and distribution hubs. Since these properties are frequently used for commercial purposes, it’s crucial to monitor their financial performance.

We’ll go over the main metrics and indicators you should take into account when assessing the financial performance of your industrial property in this blog post.

Availability Rates

The percentage of your industrial property that is leased out is referred to as the occupancy rate. Because a high occupancy rate suggests a steady stream of cash from rental income, it is an important gauge of the property’s financial performance. High occupancy rates also lessen the possibility of vacancies, which can result in a sizable loss of income.

Divide the total area that is rented by the total area that is available in your property to determine your occupancy rate. 90% occupancy or higher is regarded as a healthy level.

Rent Prices

The sum of money you charge tenants to use your commercial property is referred to as the rental rate. To make sure you’re charging a fair price, it’s critical to compare your rental rates to the market rates in your neighborhood.

A rental rate analysis can help you determine the right amount to charge based on the property’s location, size, and the current market demand for industrial properties in your area. High vacancy rates and tenant turnover may result from setting your rental rates too high.

Operational Costs

The costs involved with running and maintaining your commercial property are referred to as operating expenses. It covers costs for things like real estate taxes, insurance, utilities, repairs, and upkeep.

To ensure that you’re maximizing your profit, it’s critical to keep operating costs in check. This can be accomplished by monitoring your spending and finding areas where costs can be cut. For instance, you can work out a deal with vendors to get maintenance and repair costs lower, switch to energy-efficient lighting to lower utility costs, and install low-flow faucets and toilets to use less water.

Operating Income, Net (NOI)

An essential metric for assessing the profitability of your property is Net Operating Income (NOI). It is determined by deducting operating costs from the total rental revenue. The NOI shows how much money a property can make before taxes and mortgage payments are taken into account.

A high NOI is a great sign of a property’s financial health because it shows that it is bringing in enough money to pay the bills and leave a healthy profit margin.

Rate of Capitalization (Cap Rate)

Another important metric for assessing the financial performance of your industrial property is the capitalization rate (Cap Rate). The cap rate measures the return on investment by dividing the NOI by the property’s value.

A property with a high cap rate is more appealing to potential buyers because it is producing a higher return on investment. A low cap rate, on the other hand, shows that the property is not making enough money to support its value.

Return on Cash Invested

Another crucial metric that aids in assessing the financial performance of your industrial property is cash-on-cash return. By dividing the pre-tax cash flow by the total amount invested, it calculates the return on investment.

Because it takes into account the money you actually put into the property, the cash-on-cash return offers a more accurate reflection of the profitability of your investment. If a property has a high cash-on-cash return, it is likely making enough money to offer a healthy return on investment.

In order to maximize your return on investment, it is essential to assess the financial performance of your industrial property. You can learn a lot about the financial health of your property by taking into account metrics like occupancy rates, rental rates, operating costs, NOI, cap rate, and cash-on-cash return.

If you’re not happy with how your property is performing financially, you can make changes like reducing operating costs, raising rental prices, or enhancing the property’s look and functionality to draw in more tenants. To help you maximize the performance of your property and your return on investment, you can also think about hiring a reputable property management company. You can make sure that your industrial property continues to be a successful investment for years to come by keeping an eye on its financial performance and making any necessary adjustments.

F2H Capital Group is a debt advisory firm specializing in negotiating the best terms for your commercial real estate projects. The company offers a range of financial products and services, including fixed loans, bridge loans, and construction loans across all asset types. Please contact us for any of your financing needs.