NOI Growth Rate
NOI Growth Rate measures the year-over-year percentage change in Net Operating Income, the primary indicator of whether a property is improving its operating performance.
What You Will Learn: You'll discover how NOI Growth Rate measures year-over-year changes in property cash flow performance. Learn what drives NOI growth, how to interpret growth trends, and why consistent growth is the strongest predictor of long-term investment success.
Definition
NOI Growth Rate measures the year-over-year percentage change in Net Operating Income. It's the primary indicator of whether a property or portfolio is improving its operating performance over time.
Formula
NOI Growth % = [(Current Year NOI - Prior Year NOI) / Prior Year NOI] × 100Example Calculation
Year 1 NOI: $500,000
Year 2 NOI: $530,000
Growth = [($530,000 - $500,000) / $500,000] × 100 = 6.0%
Drivers of NOI Growth
Revenue Increases
- Rent growth through market pricing power
- Occupancy gains
- Ancillary income expansion (parking, storage, amenities)
Expense Management
- Operational efficiencies
- Economies of scale
- Technology implementation
Market Dynamics
- Supply constraints limiting competition
- Demand growth from population/employment trends
- Regulatory barriers to new construction
Interpretation Guide
| Growth Rate | Signal | Context |
|---|---|---|
| 5-8% | Strong | Sustainable pricing power, excellent execution |
| 2-5% | Healthy | Keeping pace with inflation, solid fundamentals |
| 0-2% | Sluggish | Market challenges or operational issues |
| Negative | Concerning | Declining fundamentals requiring investigation |
Comparative Performance (2000-2024 CAGR)
| Property Type | CAGR | Characteristics |
|---|---|---|
| Self-Storage* | 5.8% | *2005-2024; 2 negative years |
| Industrial | 5.2% | Strong recent performance |
| MHC | 4.6% | 25 consecutive positive years |
| Multifamily | 3.0% | 5 negative years |
| Retail | 0.8% | Structural headwinds |
| Office | -1.2% | Declining performance |
Key Insight
The consistency of NOI growth matters as much as the rate itself. MHC's unbroken streak of positive growth reflects structural advantages including supply constraints, essential housing demand, and counter-cyclical characteristics during economic downturns.
Investment Decision Framework
Evaluate Historical Consistency
Look for steady positive growth across multiple cycles
Understand the Drivers
Distinguish between revenue-driven (sustainable) and expense-cut (temporary) growth
Compare to Peers
Context matters—rates vary by property type, market, and cycle
Project Forward
Historical NOI growth informs future cash flow models and valuations
Where to Find This on Our Site
See NOI Growth Rate analysis in action on our Research & Market Insights page, featuring:
- Historical Same-Store NOI Growth charts (2000-2024)
- NOI growth comparisons across property types
- Real-time NOI performance data and analysis
Related Terms
See Historical NOI Growth Data
Explore comprehensive NOI growth analysis across property types and time periods.
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