Four measures, four questions
Revenue asks what income is recorded for the chosen period. Net operating income asks what remains after the property operating costs included in your definition. Occupancy asks how much lettable area is occupied. Cash collection asks how much of the relevant income has actually been collected.
Use the same reporting period before comparing figures. Keep taxes, financing costs and capital spending visible in their relevant schedules rather than silently changing the NOI definition from one asset to another.
Use area to combine occupancy
Multiply each asset's lettable area by its occupied proportion, add the occupied areas, then divide by total lettable area. This gives larger buildings the appropriate weight. Physical occupancy and rental-value vacancy answer different questions; label which one you report.
Your practical exercise
Choose one asset in the sample workspace. Write down the revenue, operating costs and annual NOI. Find the source period and compare the actual NOI with budget. Write one question that cannot be answered from those totals alone, such as why a variance occurred.
Worked learning example
Synthetic asset
Annual revenue EUR 180,000 less annual operating costs EUR 30,000 gives annual NOI EUR 150,000. Against an annual NOI budget of EUR 160,000, the shortfall is EUR 10,000 or 6.25%. The arithmetic does not explain the cause.
Your action checklist
- State the reporting period.
- Write the NOI definition beside the metric.
- Separate cash collection from recorded revenue.
Check your understanding
Put the learning to work.
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