4 KPIs That Successful CRE Firms Are Tracking (and You Should Too)

In the commercial real estate (CRE) industry, staying competitive requires more than just a gut feeling. It demands a data-driven approach that hinges on understanding and leveraging key performance indicators (KPIs). These metrics provide invaluable insights into the health and performance of your portfolio or assets and help to identify areas of risk and optimization. In fact, certain KPIs are considered industry standards within CRE, and failing to track them could leave you trailing behind your competitors or have you missing out on key opportunities.

To keep you ahead of the curve, we’ll not only cover four crucial commercial real estate KPIs that every CRE professional should be tracking, but also the basics of KPIs including what they are, when to use them, why they’re important, and how to use them effectively.  

What are Key Performance Indicators (KPIs)?

KPIs, or Key Performance Indicators, are metrics used to assess the performance and success of property investments, developments, or management activities. These specific measures serve as essential tools for evaluating the health and effectiveness of CRE endeavors, providing clear indications of progress towards set objectives or highlighting areas that require adjustments. Utilizing KPIs are imperative for informed decision-making, risk mitigation, and optimizing returns on investment. But when should you use them, and why are they so crucial?

When to Use KPIs

KPIs should be utilized continuously to monitor performance, identify trends, and highlight areas for improvement. Whether you’re evaluating the success of a single asset or analyzing the overall health of your portfolio, KPIs offer real-time insights that drive informed decision-making and should be a consistent activity when it comes to managing your portfolio.

Why KPIs are Important

In the fast-paced world of CRE, informed decisions can mean the difference between success and failure. With KPIs, you can gain a clear understanding of your organization’s performance, allocate resources efficiently, mitigate risks, and capitalize on opportunities. By leveraging KPIs, you gain better visibility into performance and steer your portfolio towards greater profitability.

How to Use KPIs

Harnessing the power of KPIs requires more than just data collection – it demands actionable insights. Implementing a Business Intelligence (BI) solution, such as Lobby CRE, can streamline the process, allowing you to spend less time collecting data and more time analyzing it. By leveraging a single source of truth, which enables you to automate reporting and eliminate data silos, BI solutions empower you to track KPIs effortlessly and make data-driven decisions with confidence.

The Top 4 KPIs You Should Be Tracking  

There are hundreds of KPIs to choose from – all providing valuable insights – but we have identified four to focus on if you are just getting started:  Net Cash Flow, Income Statement Items, Debt, and Physical Occupancy. These key performance indicators are indispensable tools for assessing financial health, operational efficiency, and market positioning. By tracking these metrics, you can gain insights, mitigate risks, and optimize portfolio performance.

Net Cash Flow

Net cash flow serves as a fundamental indicator of financial health in commercial real estate. It represents the surplus of cash generated from property operations after accounting for all expenses. By tracking net cash flow, CRE professionals gain insight into the property’s ability to generate positive cash flow and sustain operations.

Income Statement Items

The income statement offers a comprehensive view of a property’s financial performance, encompassing revenues, expenses, and net operating income (NOI). By dissecting income statement items, including revenue and expenses as a percentage of revenue, CRE professionals can evaluate operational efficiency, identify cost-saving opportunities, and assess NOI trends over time. Additionally, comparing these items to budgeted figures provides valuable insights into performance against financial targets.

Debt

Debt plays a crucial role in commercial real estate financing, influencing investment strategies and overall portfolio risk. Tracking debt terms and comparing them to current market conditions allows CRE professionals to assess whether debt is optimized for the property or portfolio. The debt service coverage ratio (DSCR) provides further insight into the property’s ability to generate sufficient cash flow to cover debt obligations. By monitoring debt metrics, such as interest rates and loan terms, CRE firms can mitigate financial risks and optimize capital structures.

Physical Occupancy

Physical occupancy measures the percentage of leased space compared to the total available space within a property. It serves as a key indicator of demand and property utilization. By analyzing historical trends and projecting future occupancy levels, CRE professionals can anticipate market shifts, assess property performance, and make informed leasing decisions. Physical occupancy data informs strategic asset management decisions and helps optimize revenue streams within the portfolio.

How Asset Management Software Can Help

The CRE industry is continually evolving, presenting new challenges and opportunities in today’s rapidly changing landscape. With so much data to sift through and competition to contend with, keeping a pulse on your property’s performance can be a daunting task. That’s where measuring and tracking commercial real estate KPIs becomes absolutely essential. If you’re not already measuring these four metrics at your property, now is the time to start. 

With Lobby CRE, you can address common challenges faced by CRE professionals seamlessly. These solutions help flip the 80/20 problem, where 80% of time is spent collecting data and only 20% is spent analyzing it. By automating and streamlining data collection, you can spend more time extracting valuable insights to drive strategic decision-making. Monitoring KPIs through Lobby CRE provides real-time insight into areas that require attention and drills down to underlying causes to effectively address underperformance.

Ready to take your CRE portfolio to the next level? Discover how Lobby CRE can help you track over 700 KPIs effortlessly and make data-driven decisions with confidence. Click here to see Lobby CRE in action!