Corporate Real Estate Businessman holding paper and metrics graph

21 Corporate Real Estate Metrics

HubStar, Posted December 1, 2021

Metrics help you measure the health of your company’s corporate real estate and facility management. You can’t improve what you can’t measure, and keeping tabs on these metrics can help you make sure you’re maximizing the return on the investments you’ve made in your corporate real estate portfolio.

Read on some of the most important metrics to consider as you assess how your real estate investments are performing, whether they’re offices, warehouses, data centers or retail spaces.

corporate skyscrapers from below

21 Corporate Real Estate Metrics to start measuring

mindful corporate real estate metrics from a businessman holding a city

1. Employee experience – The relationship between the satisfaction of employees and the physical spaces they use for work.

Related: Employee Experience: The Ultimate Guide

2. Facilities management – Helpful metrics to measure how well you’re managing repairs and maintenance include frequency of emergency repairs, repair backlogs, customer feedback, and invoicing.

3. Lease administration – Portfolio managers need easy visibility into metrics like upcoming critical lease events, active vs. inactive leases, and lease details to address short-term concerns and to set expectations about future requirements

4. Project management – Project managers need defined metrics to effectively manage all the phases of a task from initial establishment to handover and project closure, ensuring that projects stay within scope, on schedule, and within budget.

5. Energy and sustainability – Real estate has a major role to play in achieving an organization’s sustainability targets. Metrics like waste and water consumption, as well as reviewing the building’s overall energy consumption, are necessary to meet with sustainability standards, manage their energy costs, and cut carbon emissions.

6. Cost per Square Foot- The most basic metric for looking at a corporate real estate portfolio is cost per square foot. While it’s not useful for comparing spaces across different product types and markets, it can be a useful tool to identify an outlier among similar spaces. 

7. Space/Cost per Employee- Looking at both the square footage per employee and space cost per employee gives you a better understanding of the efficiency of your corporate real estate portfolio. Space comparisons work across the country, letting you compare the efficiency of buildings in Lower Manhattan with counterparts in Las Vegas. 

8. Sales per Square Foot- Traditionally used in retail settings, sales per square foot metrics help you compare locations in terms of their ability to directly affect your bottom line. However, this metric can be misleading by itself. To really understand the relationship of your space to your sales, you first have to adjust the space’s dimensions to reflect the proportion that is related to actual selling. Otherwise, you may mistake an inefficient location for a weak one.

9. Rent to Sales- The ultimate occupancy cost measure is the overall rent-to-sales ratio. If your company is maintaining a ratio that is more efficient than its industry as a whole, paying high rents in a few locations may not be that important. On the other hand, a location that has a low price per square foot, high employee number per square foot and costs 6 percent of sales instead of 3 percent, is problematic regardless of how good other metrics might make it look.

cre Investments decrease Facility Costs

Numbers 10-14 on our list comes from Dena Landon, writing for Stressa, a finance tool company that helps real estate investors, in a post entitled, “The Top 10 Metrics Every Real Estate Investor Should Know (and Why):” 

10. Net Operating Income (NOI)- NOI tells you how much money you make from a given investment property. It’s a version of a high-level income statement. To calculate it, take your total income and subtract operating expenses.  

11. Capitalization Rate (Cap Rate)- Cap rate is the real estate equivalent of the stock market’s return on investment. It’s the ratio between the amount of income produced by a property to the original capital invested (or its current value). It tells you the percentage of the investment’s value that’s profit. 

12. Internal Rate of Return (IRR)- IRR estimates the interest you’ll earn on each dollar invested in a rental property over its holding period. It’s the rate of growth that a property has the potential to generate. The calculation goes beyond net operating income and purchase price to estimate long-term yield. 

13. LTV Ratio- The Loan to Value Ratio measures the amount of leverage on a particular asset. An LTV matters to buyers who finance their deals as it measures the amount you’ll need to finance against the property’s current fair market value. But, LTV is also the best way to track the equity you hold in a property (not just for financing) but for the value of your portfolio and assets accounting for debt. 

14. Debt Service Coverage Ratio- Lenders also pay close attention to your Debt Service Coverage Ratio, or DSCR. It compares the operating income you have available to service debt to your overall debt levels. Divide your net operating income by debt payments, on either a monthly, quarterly, or annual basis, to get your DSCR.

15. Tenant Turnover – This real estate investment KPI is very important if you own multiple properties. It tells you the rate at which your tenants are leaving. A low turnover rate is desirable as it means that your property is occupied and making you money. Turnover Rate = (# of Tenants Moved Out / Total # of Tenants) * 100%

16. Operating Expense Ratio – How much does it cost you to manage all your properties and maintain them? Is it worth your time? This real estate performance metric can help you make that decision by comparing the operational costs to the rental income. Ideally, this ratio is below 80%.Operating Expense Ratio = ((Total Operating Expenses – Depreciation) / Gross Revenue) * 100%

17. Equity to Value Ratio –The equity ratio is used to determine how leveraged a business is. In real estate, it compares the amount of equity you have in a property to its assessed value. Typically, a ratio less than 0.5 indicates that a business is heavily leveraged. Equity to Value Ratio = Total Property Equity / Total Property Value

18. Average Rent Price Per Property – How much are your units renting for? How does this compare to last quarter? Or last year? This real estate metric determines the average monthly rental price to help compare quarterly or annual changes. Average Rent Price Per Property = Total Monthly Revenue / Total # of Properties

Rounding out our list are three items from Joel Parker, Director of Professional Education and Research at Industrial Asset Management Council,  in Site Selection Magazine, a magazine dedicated to corporate facility location and area economic development. Tips from Parker’s article, entitled “Corporate Real Estate Performance Ratios: How Does Your Organization Stack Up,” are below:

19. Space per Corporate Employee- Space per corporate employee is defined as total leasable space divided by corporate head count. The measure can be used to compare how effectively competing companies manage their space assets. 

20. Corporate Sales per CREM Employee- Sales per CREM employee is calculated by dividing publicly reported annual sales (or revenue for industries that do not report sales) by real estate department head count as defined above. The ratio can be used to compare the efficiency of real estate departments in competing companies. 

21. Corporate Employees per CREM Employee- Traditionally, corporate planners scrutinized space per CREM employee to evaluate the function’s efficiency. But as the function evolves toward stronger workplace and customer-service orientations, the ratio of those serving to those being served by CREM is becoming more important. Corporate employees per CREM employee is an efficiency ratio that can be used in tandem with corporate space per CREM employee to compare one company’s real estate function to that of another.

HubStar, is a space utilization software that helps to optimize and creative adaptive workplaces. Our technology works to enable data-driven real estate decisions providing you with proactive insights that can save you money on unnecessary leases and improve employee experiences.

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