Expenses Will Likely Still Strain NOIs Even When Inflation Subsides

February 23, 2024

Moody’s Analytics outlined real estate sector challenges, focusing on persistent inflation impacts on Net Operating Income (NOI). Analysis reveals that even though costs like utilities and insurance might align with economic trends, companies hesitate to lower prices. Insurance rates in CMBS properties spiked by 73% over five years. Increasing insurance and other operational costs, including utility bills and property taxes, threaten NOI, particularly if economic downturns outpace revenue growth.

Bottom Line: Despite potential future decreases in inflation, persistent high operating costs, especially in insurance and utilities, pose a significant risk to Net Operating Income in the real estate sector.

Bottom Line: NWAs unique blend of innovative commerce and lifestyle is positioning it as a competitor to Silicon Valley, amplified by the Walton Family Foundation’s investments.

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Neal's take

Mission 10K is extremely NOI (Net Operating Income) focused. We have profiled 323 markets in the U.S., and instead of focusing on super high growth cities (like Austin or Phoenix), we are obsessed with cities that have lower property taxes and insurance. We believe that over the next decade, the industry will become much more NOI focused than growth focused. Having said all that, Mission10K projects are not immune to the challenges mentioned. We need to watch the bottom line closely.