Infrastructure and services (6 of 6)

Property owners and REITs

About 7 minutes to read in full, or 1 minute for the short version belowFacts checked 2 October 2026

In one minute

Companies and funds own finished buildings such as offices, warehouses, rental homes and shopping centres, and earn rent from the tenants who use them.

The big idea: A property owner sells the use of space through leases, so profit comes from keeping space full at rents close to the market while controlling running costs and the cost of debt. A building is valued as its income divided by the yield buyers want, so higher interest rates can cut values and raise debt ratios even while rents rise.

One unit, in numbers: One year of a 200,000 square metre logistics park in Europe: EUR 13.3 million comes in, and EUR 8.20 million (62%) is left after its own costs.What is left is the unit's contribution, before the costs of the whole company. See the worked example
Typical margin: About 65 to 70 percent NOI margin for US apartments, higher for net-leased warehouses; much less after interestRoughly how much of every 100 of sales (or income) is left as profit after the running costs. More on margin
Capital intensity: Very highVery large sums must be tied up before the business earns anything, so the cost of that money weighs heavily on profit. More on capital intensity
The number to watch: Occupancy rate of a portfolioThe share of space that is let to tenants.

Ask this first in a case

Which property type and which city, and how full is it?

Words used above (1)

Net operating income (NOI):: Rent and other property income minus the property running costs the owner pays.

The industry's other words are explained in Words to know (12).

On this page (17 sections)

How money is made

Owners collect rent under leases, from a year or less for homes to five or ten years for offices and warehouses.
Tenants in shared buildings also pay service charges, and in net leases they pay the running costs directly.
Rents rise through fixed steps, links to inflation or reviews to market, and jump when a lease is renewed at a higher market rent.
Owners gain or lose as property values change, and lock in the result when they sell.
Outside managers of REITs, common in Singapore and India, earn fees based on the assets and income they manage.
Some owners add income from parking, power for data centres or flexible offices.

Worked example: one unit

Unit economics means the money in and out for one unit of the business. Start from the revenue, take away the unit's own costs, and what is left is its contribution. More on unit economics

The unit: One year of a 200,000 square metre logistics park in Europe, 95 percent let (EUR million). Illustrative, rounded figures.
Line	Amountin EUR millions	ShareShare of revenue
Rent: 190,000 square metres let at EUR 70 per square metre	EUR 13.3	100%
Minus Property running costs not recovered from tenants	EUR 1	7.5%
Minus Share of head office and management costs	EUR 0.50	3.8%
Minus Interest on EUR 90 million of debt at 4 percent	EUR 3.60	27%
What is left (contribution)	EUR 8.20	62%

Check: EUR 13.3 minus EUR 5.10 of costs leaves EUR 8.20 (in EUR millions).

So what: About 62 percent of the rent is left as funds from operations. Each point of occupancy adds EUR 0.14 million a year, but one more point of interest on the EUR 90 million of debt costs EUR 0.9 million, so financing can matter as much as leasing.

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Key measures(9)

Key measures (also called KPIs, key performance indicators) are the numbers people in this industry track. Ask for the first one or two early in a case.

Occupancy rate of a portfolio
The share of space that is let to tenants.
Typical: 95.8 percent at Prologis and 86.7 percent at BXP at the end of 2025[1]
Same-store NOI growth
The change in net operating income from buildings owned in both years.
Typical: 2.2 percent at Equity Residential in 2025[3]
Rent change on rollover (reversion)
How much the rent on a renewed or re-let lease differs from the old one.
Typical: 43.8 percent net effective at Prologis in the fourth quarter of 2025; minus 8.2 percent in Link REIT's Hong Kong retail[1]
Weighted average lease expiry (WALE)
The average time left on leases, weighted by rent.
Typical: 8.4 years at Embassy Office Parks REIT[7]
FFO per share
Funds from operations per share: recurring earnings with property depreciation and sale gains taken out.
Typical: USD 5.81 at Prologis in 2025[1]
Net asset value (NAV or EPRA NTA) per share
Property value minus debt, per share.
Typical: 925 pence at SEGRO at the end of 2025[6]
Loan to value (gearing)
Debt as a share of the value of the properties. Glossary: Loan to value (gearing)
Typical: About 31 to 45 percent at large European owners in 2025[5]
Interest cover
Income divided by interest; regulators and lenders set minimums.
Typical: At least 1.5 times for Singapore REITs[8]
Net effective rent
Rent over a lease after rent-free months and other incentives, per square metre per year.

First questions to ask

When a case lands in this industry, these questions get you to the numbers that matter.

Which property type and which city, and how full is it?
How do rents in place compare with market rents, and when do the leases end?
Who pays the running costs, and what incentives are tenants getting?
How much debt is there, at what cost, and when must it be refinanced?
Is the problem income (occupancy, rent, costs) or value (the yield buyers want)?

Value chain: where the margin sits

The value chain is the steps a product or service passes through, from the first supplier to the customer. Each step below shows how much of the value it keeps. More on value chains

Step 1: Development: buy land, get permission and build
Margin varies
Developers and contractors (covered in the construction and real estate brief)
Step 2: Buying and financing finished buildings
Medium margin
REITs, pension and sovereign funds, private equity firms such as Blackstone, banks and bond investors
Step 3: Leasing: find tenants and agree rents and terms
Medium margin
Owners' leasing teams and brokers such as CBRE and JLL
Step 4: Property and facility management: cleaning, security, repairs, service charges
Thin margin
Property managers and facility service firms
Step 5: Owning the building and collecting rent over many years
Fat margin
Prologis, Vonovia, SEGRO, Link REIT, Embassy Office Parks REIT, CapitaLand Integrated Commercial Trust
Net operating income is often two thirds or more of rent; interest and overheads come out of it.
Step 6: Tenants use the space for work, storage, selling or living
Margin varies
Companies, retailers, logistics firms and households

Profit pool: who keeps the money

Where in the value chain the profit ends up, which is often not where most of the sales are. More on profit pools

Most of the profit goes to owners of buildings that tenants compete for: warehouses near big cities, the best offices and homes where people want to live. Older offices and weaker shopping centres earn less and need heavy spending to stay let, while property managers and service firms earn thin fees.

Cost structure(4)

The main costs, each as a share of revenue (the money from sales).

Property running costs (repairs, taxes, insurance, site staff): About 31 percent of revenue for large US apartment owners (AvalonBay same-store NOI margin about 69 percent in 2025); far less for net-leased warehouses[4]
Interest on debt: Depends on gearing; loan to value of 31 percent at SEGRO and 45.4 percent at Vonovia at the end of 2025[6]
Overheads and management fees: A few percent of revenue (illustrative)
Upkeep and refurbishment spending: Varies widely; older offices need large refurbishments to stay let (illustrative)

Benchmarks(6)

Typical figures for the industry, to check a client's numbers against.

Payout rule, US REITs: At least 90 percent of taxable income[9]
Borrowing limit, Singapore REITs: 50 percent of assets, with interest cover of at least 1.5 times[8]
US listed REITs (FTSE Nareit All REITs, end of 2025): 195 REITs worth about USD 1.44 trillion[10]
Total return, US listed REITs in 2022: About minus 25 percent, against about minus 18 percent for the S&P 500[11]
NOI margin, US apartments (AvalonBay same-store, 2025): About 69 percent[4]
Listed REITs in India (August 2026): Six, with about 214 million square feet and a market value above INR 2,15,000 crore[12]

Typical cases(6)

Case prompts you might hear in this industry.

A REIT's share price fell 20 percent while its rents rose. Why, and what should it do?
Should an owner convert an empty office building into homes?
A large tenant asks for a big rent cut to stay. Should the owner accept?
Should a logistics REIT buy a portfolio of warehouses?
A shopping centre owner's income is falling. How can it recover?
Should a family office invest in an Indian office REIT or a Singapore REIT?

Common traps(5)

Mistakes candidates make in this industry, and what to do instead.

Comparing headline rents without counting rent-free months, fit-out money and empty periods.
Treating a fall in property value as a fall in income, or the other way round.
Forgetting that payout rules leave a REIT little cash, so growth depends on debt and new shares.
Treating offices as one market, when the best buildings and the rest behave very differently.
Reaching for a generic framework instead of the real driver of this industry. Instead, split income from value, then check the leases and the debt.

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What changed, 2024 to 2026(6)

Recent changes a case could turn on.

Rates stayed higher: the US 10-year bond yield averaged 4.29 percent in 2025 against 1.44 percent in 2021, and US listed REITs returned about 1.7 percent in 2025 against about 17.9 percent for the S&P 500.[10]
Values steadied in places: Vonovia booked a EUR 1.4 billion valuation gain in 2025 after a EUR 10.7 billion loss in 2023.[5]
Warehouse owners consolidated: Prologis agreed in August 2026 to buy SEGRO for about USD 18.8 billion, expected to close in the first half of 2027.[2]
Warehouse land with grid power became data centre land: Prologis had a 5.7 gigawatt power pipeline at the end of 2025.[1]
Offices split by quality: Landsec's London office-led portfolio was 98.6 percent occupied in 2026, while Hong Kong Grade A office vacancy rose to 18.4 percent at the end of 2025 from 9.0 percent in 2019.[13]
New REIT markets grew: India reached six listed REITs, Dubai Residential REIT raised AED 2.1 billion in May 2025, and mainland China went from 29 listed REITs in 2023 to 58 in 2024.[14]

Players by region(9)

Well-known companies in each region. You do not need to learn them by heart; they help you picture the market.

Global: Prologis (warehouses)
Blackstone (private real estate funds)
Brookfield
GIC
United States: Equity Residential
AvalonBay
BXP (offices)
Simon Property Group (malls)
Europe: Vonovia (homes, Germany)
SEGRO (warehouses, UK)
Landsec (UK)
Unibail-Rodamco-Westfield (malls)
India: Embassy Office Parks REIT
Mindspace Business Parks REIT
Brookfield India REIT
Knowledge Realty Trust
Nexus Select Trust (malls)
Middle East: Dubai Residential REIT
Emirates REIT
Aldar (Abu Dhabi)
Southeast Asia: CapitaLand Integrated Commercial Trust
Mapletree Logistics Trust
China: Link REIT (Hong Kong)
Public REITs listed in Shanghai and Shenzhen
Latin America: Fibra Uno (Mexico)
Africa: Growthpoint Properties (South Africa)

Words to know(12)

Linked words have a fuller entry in the glossary.

REIT (glossary entry): Real estate investment trust: an owner of rented property that pays out most of its income and pays little company tax.
Net operating income (NOI) (glossary entry): Rent and other property income minus the property running costs the owner pays.
Funds from operations (FFO): Net income with property depreciation and gains or losses on sales taken out.
Net lease: A lease where the tenant pays some or all running costs on top of rent.
Service charge: What tenants in a shared building pay for common costs such as cleaning and security.
Rent-free period: Months at the start of a lease when the tenant pays no rent, used as an incentive.
Net effective rent: Rent after incentives, spread over the lease.
Reversion: The gap between the rent on a lease and the current market rent.
WALE: Weighted average lease expiry: the average time left on leases.
Cap rate (glossary entry): Yearly net income as a share of a property's price.
EPRA NTA: A European measure of net asset value per share for listed property companies.
Gearing: Debt as a share of assets; another name for loan to value.

Business model patterns

The ways of making money this industry follows. Spot the pattern in a new industry and you already know the first questions to ask.

Sources(16)

Facts checked on 2 October 2026. Worked examples are illustrative, shaped by these sources rather than one company's figures.

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In one minute

How money is made

Worked example: one unit

Key measures(9)

First questions to ask

Value chain: where the margin sits

Step 1: Development: buy land, get permission and build

Step 2: Buying and financing finished buildings

Step 3: Leasing: find tenants and agree rents and terms

Step 4: Property and facility management: cleaning, security, repairs, service charges

Step 5: Owning the building and collecting rent over many years

Step 6: Tenants use the space for work, storage, selling or living

Profit pool: who keeps the money

Cost structure(4)

Benchmarks(6)

Typical cases(6)

Common traps(5)

What changed, 2024 to 2026(6)

Players by region(9)

Words to know(12)

Business model patterns

Sources(16)

Go deeper and practise

Go deeper

Practise it

Same pattern elsewhere

Practise property owners and REITs