Benchmarking Financial Performance in Commercial Real Estate

ARTICLE | May 06, 2024

For small businesses, benchmarking the financial performance of your commercial property is necessary to identify improvement opportunities, optimize operations, and enhance profitability. In this article, we’ll look at why it makes sense to prioritize benchmarking and the best ways to get it done.

Why benchmark property financial performance?

There are several primary benefits of measuring and comparing key financial metrics against industry benchmarks for your commercial property:

• Identify strengths and weaknesses: Benchmarking allows you to pinpoint areas where your property outperforms competitors and areas where improvement is needed, so you can focus resources on areas with the greatest potential for enhancement.

• Set realistic goals: By understanding industry benchmarks, you can set realistic financial goals for your property and establish a roadmap for achieving sustainable growth.

• Improve decision-making: Whether it’s optimizing rental rates, reducing operating expenses, or investing in property upgrades, benchmarking helps you make informed decisions that drive profitability.

Techniques for benchmarking property performance

These are some of the common techniques for measuring and comparing property performance:

• Key performance indicators (KPIs): Track the KPIs that are relevant to your property’s financial performance, such as occupancy rates, average rental income per unit, operating expenses as a percentage of revenue, and net operating income (NOI). Compare these KPIs against industry benchmarks to assess your property’s performance relative to peers.

• Financial ratios: Calculate financial ratios such as ROI and capitalization rate to evaluate your property’s financial health and profitability. Then compare them to industry averages to gauge performance and identify areas for improvement.

• Budget variance analysis: Conduct a budget variance analysis to compare actual financial performance against budgeted expectations to identify areas of overspending or revenue shortfall that require attention.

• Trend analysis: Analyze revenue and expense trends, occupancy trends, and market dynamics to assess the trajectory of your property’s financial performance relative to industry benchmarks.

Get help benchmarking financial performance in commercial real estate

Sage Intacct is a powerful cloud-based financial management solution that offers robust capabilities for benchmarking property financial performance, including real-time access to financial data that makes it easy to monitor KPIs and compare them with industry benchmarks on the fly.

With Sage Intacct’s customizable reporting features, you can also generate tailored reports that benchmark your property’s financial performance against industry standards. Whether it’s occupancy trends, revenue analysis, or expense benchmarking, Sage Intacct offers the flexibility to create insightful reports that drive informed decision-making.

Get the support you need

Insero & Co. is a public accounting firm with decades of experience working with businesses on financial performance in commercial real estate. Our experts provide customized consulting services, including end-to-end business optimization services for businesses of all sizes.