CRE Metrics to Watch: Sector, Market, Asset

In today’s shifting landscape, investors, lenders, brokers, and advisors alike are under pressure to make decisions backed by data rather than intuition. The challenge? Commercial real estate generates an overwhelming number of data points, from occupancy rates to cap rates to job growth. Knowing which commercial real estate metrics actually matter is what separates strategic investing from guesswork.

Importantly, the right metric depends on whether you’re looking at the sector (property type), the market (geography), or the asset (individual property or portfolio). At Green Street, decades of research have identified both industry-standard benchmarks and proprietary tools that cut through the noise. From Market Grade and Market Beta to the TAP Score and M-RevPAF, these forward-looking measures are designed to sharpen investment decisions and provide consistency across property types.

This article breaks down the most important commercial real estate metrics to track at each level and even shares some of Green Street’s proprietary metrics that we use to help deliver you the insights to gain a competitive edge.

Sector-Level Commercial Real Estate Metrics

Sector-level metrics give you a read on property type fundamentals and supply-demand dynamics. Whether you’re investing in multifamily, office, industrial, retail, or niche sectors like senior housing or self-storage, these data points provide the baseline for performance. Knowing these metrics and how they relate to one another can help guide your research as well as optimize your data insights to make more confident decisions in an ever-shifting market.

1. Rent Growth
   • One of the most critical commercial real estate metrics. It reflects the ability of landlords to push pricing power and indicates both profitability and tenant demand. Sustained rent growth is usually a sign of tight supply, strong absorption, or rising replacement costs.
2. Occupancy / Vacancy
   • The occupancy rate is a staple metric that measures how much rentable square footage is currently leased. Strong occupancy, especially when paired with positive rent growth, signals sector health. For example, industrial occupancy above 95% indicates severe supply pressure, while office vacancy above 20% may point to long-term challenges.
3. Effective Rent vs. Asking Rent
   • Asking rent is the sticker price; effective rent accounts for concessions, tenant improvements, and free rent periods. The spread between the two can reveal hidden softness in demand. Effective rents are often a truer reflection of cash flow expectations.
4. Bid-Ask Spread
   • The bid-ask spread in CRE is less often discussed but is a key measure of market liquidity. A narrow spread means buyers and sellers are aligned; a wide spread means transaction markets are frozen or uncertain.
5. Tenant Retention
   • High tenant retention reduces turnover costs, stabilizes cash flow, and often signals strong property management. A retention rate above 70–80% is generally considered healthy in most sectors.
6. Net Absorption
   • This metric measures the change in occupied space over a given period. Positive absorption indicates demand is outpacing supply, while negative absorption (as seen in U.S. office markets recently) is a red flag.
7. Foot Traffic Trends (Retail-Specific)
   • For retail, foot traffic is one of the most telling metrics of tenant performance and property health. Advances in mobile and sensor data now allow granular insights into customer patterns, dwell time, and catchment area demographics.
8. Development Hurdle Rate (Green Street Proprietary)
   • A key driver to Supply Vs Demand Balance is new developments. Of course, keeping an eye on what new developments are in the pipeline can help you project supply-demand shifts. It can also help you consider whether or not you should be looking into new developments yourself. Green Street calculates proprietary development hurdle rates, which represent the profit margin developers must achieve to justify new projects. These vary by property type and pre-leasing levels, reflecting sector-specific risk. For investors, hurdle rates act as an early-warning indicator for potential oversupply.

Market-Level Commercial Real Estate Metrics

Markets behave differently even within the same property sector. A multifamily asset in Dallas faces different risks than one in San Francisco. Market-level metrics provide context for comparing geographies and understanding regional risks.

1. Market Grade (Green Street Proprietary)
   • One of Green Street’s most powerful proprietary tools, Market Grade distills long-term growth expectations into a simple letter grade ranging from A++ to D. Calculated using ten key sector-specific drivers, Market Grade shows relative rent growth potential vs. local inflation. For portfolio managers, it’s an efficient way to allocate capital across markets.
2. Market Beta (Green Street Proprietary)
   • Market Beta measures a market’s volatility relative to the national average. It captures both operating fundamentals and asset value swings. A high-beta market offers higher upside in boom periods but steeper declines in downturns. Risk-adjusted investors use Market Beta to balance exposure between stable and cyclical geographies.
3. Market Cap Rates
   • While cap rates are an asset-level measure, market-level cap rates benchmark how local pricing compares to national averages. They’re especially relevant in multifamily and hotel sectors.
4. Population Growth & Density
   • Demographics drive demand. Markets with strong in-migration and density (e.g., Sun Belt multifamily markets) often outperform in rent growth and absorption.
5. TAP Score (Green Street Proprietary)
   • The Trade Area Power (TAP) Score is a Green Street proprietary measure that evaluates retail market strength by combining demographics like income, education, and cost of living within a defined radius. Ranging from 1 to 100, TAP Scores help investors differentiate between seemingly similar retail submarkets and pick locations with durable demand.
6. Job Growth
   • Job growth is a fundamental demand driver across office, housing, and retail. Strong job creation supports leasing activity, reduces vacancy risk, and underpins rental rate growth.

Asset-Level Commercial Real Estate Metrics

Finally, asset-level metrics drill into the performance, creditworthiness, and risk profile of individual properties. These metrics provide the foundation for underwriting and ongoing portfolio management.

1. Net Operating Income (NOI)
   • NOI is the lifeblood of property performance—revenues minus operating expenses. Investors watch NOI growth closely as it drives valuation, debt coverage, and distributions.
2. Net Asset Value (NAV)
   • NAV represents the mark-to-market value of assets minus liabilities, often shown per share for public REITs. Green Street applies a rigorous private-market valuation methodology to derive NAV, offering investors an apples-to-apples way to assess whether companies trade at a discount or premium to intrinsic value.
3. Net Initial Yield (NIY)
   • Popular in Europe, NIY calculates net rental income divided by market value plus purchaser’s costs. It serves as a yield-based valuation benchmark.
4. CapEx
   • Capital expenditures are often underestimated in CRE underwriting. Green Street normalizes CapEx to reflect the true long-term cost of ownership, offering a more realistic view of property-level cash flows.
5. Weighted Average Lease Term (WALT)
   • WALT shows the average remaining lease duration across tenants, weighted by rent or area. Longer WALTs reduce rollover risk and improve income predictability.
6. Loan-to-Value (LTV)
   • LTV compares loan balances to appraised value. A lower LTV reduces financing risk and improves flexibility. Green Street suggests a 30% LTV as a well-leveraged approach.
7. Occupancy Cost Ratio (Retail-Specific)
   • This ratio compares total rent and occupancy costs to tenant sales. In malls, stabilized ratios of 12–16% are typical; anything above that can stress tenants.
8. Tenant Quality
   • Assessing tenant creditworthiness is essential, especially in office and retail. A high tenant quality score translates into reduced default risk and higher asset value.
9. Cap Rates (Market vs. Economic)
   • Cap rates provide a quick measure of yield, but Green Street emphasizes economic cap rates, which adjust for CapEx. This allows investors to fairly compare high-CapEx property types (like office) to lower-CapEx sectors (like self-storage).
10. IRR (Internal Rate of Return)
    • Internal Rate of Return (IRR) provides a time-adjusted measure of total return, incorporating cash flow and terminal value assumptions. Green Street offers a risk-adjusted variant of IRR to make our projections even more nuanced to real-life asset performance.
11. M-RevPAF (Green Street Proprietary)
    • Market Revenue per Available Foot (M-RevPAF) combines effective rents and occupancy into a single, sector-agnostic measure of market health. By blending the two, Green Street gives investors a more holistic view of income potential than either metric in isolation. In Europe, the equivalent measure is Market Revenue per Available Metre (M-RevPAM).

Why Proprietary Metrics Matter

Traditional commercial real estate metrics—like occupancy, rent growth, and cap rates—are necessary but often backward-looking. Green Street’s proprietary measures add forward-looking and risk-adjusted perspectives that make them especially valuable for institutional investors.

These tools not only allow for better comparability across sectors and markets, but they also provide a consistent framework that reduces bias and enhances decision-making.

Knowing Your Numbers

The universe of commercial real estate metrics is vast, but not all data points are created equal. Investors should tailor their focus depending on whether they’re evaluating a sector, a market, or a specific asset. By combining industry-standard benchmarks with proprietary insights like Green Street’s Market Grade, Market Beta, TAP Score, Development Hurdle Rate, NAV, and M-RevPAF, stakeholders can cut through the noise and identify the metrics that truly move the needle.

In an industry defined by cycles and uncertainty, success comes down to having the clearest lens on value and risk. And that means tracking the right metrics at the right level.