Definition
The total income generated from a property after deducting operating expenses, excluding financing costs and taxes.
Net Operating Income (NOI) is a critical financial metric used in the evaluation and management of income-producing commercial real estate properties, including industrial and logistics assets. It represents the total revenue generated by a property—primarily rental income and additional operational revenues—after subtracting all operating expenses necessary to maintain and run the property. These expenses typically include property management fees, maintenance and repairs, insurance, property taxes, utilities, and other recurring costs directly related to property operation. Importantly, NOI excludes financing expenses such as mortgage interest payments and capital expenditures related to property enhancements or major repairs. As a result, NOI provides a clear picture of the property’s ability to generate income from ongoing operations alone. For investors and asset managers in the industrial real estate sector, including those operating within Central and Eastern Europe (CEE), NOI serves as a foundation for property valuation, performance benchmarking, and investment decision-making. Additionally, NOI is often used to calculate key investment metrics such as the capitalization rate (cap rate), which helps determine fair market value and assess return potential relative to market conditions. Understanding and optimizing NOI enables stakeholders to make informed decisions on leasing strategies, operational efficiencies, and investment opportunities specific to industrial logistics hubs, warehouses, and distribution centers.
Practical Example: IPEC Group
At IPEC Group, NOI is a vital component in managing and evaluating our portfolio of industrial and logistics properties across Slovakia and the broader CEE region. When developing state-of-the-art logistics parks, we meticulously forecast rental income from long-term tenant leases alongside ancillary revenues such as service fees. Concurrently, we rigorously control operating expenses including facility maintenance, security, and property management costs. By optimizing NOI, IPEC ensures that each asset delivers sustainable operational profitability, which in turn supports efficient capital allocation and attractive returns for investors. This disciplined approach allows IPEC to maintain leading occupancy rates and maximize asset valuation in a competitive industrial real estate market.