CRE Portfolio Metrics Asset Managers Should Be Tracking in 2024

The portfolio metrics that your commercial real estate (CRE) firm tracks can either make or break the success of your portfolio. When you’re tracking the right metrics, you can pinpoint what’s working well in your portfolio (such as how your NOI has increased year-over-year) and the root of this success. On the other hand, tracking the right metrics can also show you where you’re missing the mark (such as reduced cashflow or low occupancy and delinquency rates) and help you identify how to get back on track.

We talked to Mark Runde, Managing Director of Real Estate at Thirty Capital, to learn which CRE portfolio metrics are essential to monitor and extract actionable insights from in 2024 to help firms “survive and thrive until 2025”.  

Question 1: What are the key CRE portfolio metrics Asset Managers should be tracking today?

Mark Runde: First, you should continue to track all of the fundamentals that you have in the past: rents, occupancy, and expenses, as well as how all of those are changing over time. These fundamentals filter down to the bottom line, or net cash flow.

There are several major threats to cash flow today including:

1. Potential or actual softening in occupancy and rent growth (or a rent decline)
2. Inflationary pressures on expenses (payroll, utilities, and property insurance)
3. Higher interest rates putting pressure on properties with floating rate debt and/or properties with near-term loan maturities

Understanding where your property lies amongst each of these threats will be critical to your portfolio’s success.

Question 2: How can Asset Managers apply these key metrics to track portfolio performance?

Mark Runde: When you’re looking at rents and occupancy, you’ll want to consider, has your rent growth slowed from prior periods or even declined? Has your occupancy started to decline? By asking these questions, you can start to form a plan to stop or reverse these trends.

On the expense side, what if expenses are growing faster than revenues? If your expense ratio is increasing, you’ll want to consider the actions you can take to lower your expenses without sacrificing the quality of your property or the services you provide. For example, you might consider renegotiating your vendor contracts to lower prices. Or, you may decide to buy bulk utility contracts. 

On the debt side, tracking debt service coverage ratio (DSCR) lets you see whether you’re in compliance with loan covenants or in danger of falling out of compliance. If either of these are true, you’ll want to consider ways to improve your revenues and/or expenses to resume compliance.

On both expenses and debt, the metrics you track can help you pinpoint issues in your portfolio and help you find solutions to improve your property and portfolio’s performance.

Question 3: How often should Asset Managers monitor these metrics?

Mark Runde: The easy answer is constantly – especially with the economy being a little softer than it has been in the past. Although financial results are only delivered at the end of each month, that doesn’t mean you can’t check in with property management to understand what’s happening during the month and address anything that needs attention.

On the leasing and operations side, it’s common to receive weekly reports. However, things change quickly in the multifamily business, and it’s an advantage if you can have access to this data daily. 

Question 4: How often should Asset Managers assess their property performance?

Mark Runde: Asset managers constantly need to assess each property that they’re overseeing and make changes as necessary. Each property and/or market may have different challenges during the year. Therefore, I never set a specific date on which to evaluate. Instead I review each property on an ongoing basis to understand its individual needs. Essentially, property performance assessments should be a constant process throughout the year.

Question 5: What advice would you give Asset Managers who are unsure how to begin tracking metrics across their portfolio?

Mark Runde: The most important thing is to remember the importance of staying on top of your property’s performance on a real-time basis or as near to real-time as possible. This approach allows you to process information and react quickly to shifts in the market, changes at your property, and anything else that may arise during the year.

How Asset Management Software Can Help

An asset management software solution, like Lobby CRE, provides pre-built and fully configurable KPI dashboards to help you track your portfolio’s performance. Pre-built dashboards help you save time so that, instead of spending time creating templates, you can dive right into accessing and leveraging the data.  Want to learn more about the 600+ KPIs you can track in Lobby CRE? Click here to see Lobby CRE in action!