Levered Yield

Levered yield represents the return on an industrial real estate investment after accounting for the impact of financing through debt. Unlike unlevered yield, which considers the property’s income and value without debt, levered yield factors in the cost of debt service—including interest and principal repayments—thus reflecting the actual return to equity holders. This metric is essential for investors and asset managers because it shows how leverage, or borrowed capital, enhances or diminishes returns. By incorporating financing costs, levered yield provides a more accurate picture of profitability and risk, enabling more informed investment decisions. In practical terms, levered yield helps quantify how the use of debt amplifies the equity returns but also increases exposure to financial risk, especially if operating income fluctuates or interest rates change. For industrial and logistics properties, where large capital investments are common, understanding levered yield is crucial to balance growth opportunities with prudent financial management.