Measures to Enhance Net Operating Income and Property Value

There are several key metrics that successful real estate companies rely on to generate long-term economic value. Two of the most important are a low vacancy rate and a high net operating income (NOI). By maximizing occupancy and streamlining operations, companies not only strengthen cash flow but also boost the overall value of their properties. But how exactly does a high level of service contribute to achieving these financial goals in practice?

We have previously demonstrated the clear link between high service levels and both lower vacancy rates and stronger NOI, across residential as well as commercial real estate companies. Below, we share four real-life cases that make the point clear: satisfied tenants are good business.

Note: All monetary amounts in this text were originally calculated in SEK, with estimations based on the Swedish real estate industry. EUR values are provided here as approximate conversions for illustration purposes.

Case 1: Low vacancy rates – the key to stable income and increased property value

The vacancy rate shows what portion of a property portfolio is unoccupied and, as a result, not generating rental income. A low vacancy rate provides the company with more stable and predictable revenue, while vacant apartments can quickly erode earnings.

Example

Consider a real estate company that owns 3,000 apartments. If 7% of these are vacant, 210 apartments have no tenants. Assuming an average monthly rent of €696 per apartment:

Value of the properties:

• Total annual rental income without vacancies: €25.0 million
• Average yield on the properties 5.1% = €362 million in property value
• Loss of rent per month: 210 × €696 = €146,000
• Rental loss per year: €146,000 × 12 = €1.75 million

If the property company manages to reduce the vacancy rate to 3%, only 90 apartments will remain vacant, meaning the company will have 120 fewer unoccupied units. This results in:

Extra rental income per month: 120 × €696 = €83,500
Annual extra income: €83,500 × 12 = €1.0 million

As a result, the property value increases by €19.7 million, bringing the total value to €381 million. Additionally, this generates more than €1.0 million in extra net operating income – the financial surplus remaining after all operating, maintenance, and tax costs have been deducted from rental income.

Case 2: What does it cost to lose a commercial tenant?

There is a strong correlation between a high service index and tenants’ likelihood of staying with their current landlord when their premises needs change. At the same time, almost 12 percent of commercial tenants report that they would not return to their current landlord if their space requirements changed.

This figure not only reflects a lack of loyalty but also represents a concrete and often underestimated financial risk for property owners. Replacing a tenant is a complex process involving lost revenue, costs for adapting the premises, and marketing and brokerage expenses. The following example illustrates the financial impact:

Example

Assumptions

• Premises size: 200 m²
• Rent level:€261/m²/year → €52,200/year → €4,350/month
• Vacancy period: 6 months
• Premises adaptation: €87/m²

Cost overview

Revenue Analysis

For a five-year lease with an annual rent of €52,200, the total contract value amounts to €261,000. The initial cost corresponds to:

• 26.2% of the contract’s total revenue value
• Payback period: 16 months

Conclusion

There is a clear link between service levels and tenants’ willingness to remain with their current landlord. Yet, almost 12% of commercial tenants in Sweden state that they would consider switching landlords if their space requirements changed. This calculation illustrates that tenant relationships are not just a matter of satisfaction – they are a business-critical factor. By working systematically with service, adaptation, and long-term value-driven management, landlords can reduce this risk, improve profitability, and strengthen both net operating income and overall property value.

Case 3: Strengthening Net Operating Income Through Higher Service Levels

Net operating income (NOI) is the difference between a property’s rental income and its operating costs. A higher NOI means greater profitability and increased property value. While NOI is often associated with cost savings, service quality is just as important – and in many cases, better service can also reduce operating costs over time.

A more efficient fault-reporting process

A large property company may handle as many as 100,000 fault reports from tenants each year. This creates a heavy administrative and operational workload – from logging cases and planning measures to dealing with wasted site visits when tenants are not at home.

By working systematically with tenant feedback and implementing structured improvements, several companies have successfully reduced the volume of fault reports.

Assumptions

• 100,000 fault reports per year
• 50,000 work orders (50% require action)
• 5,000 missed visits (tenants not at home)
• Administrative cost per fault report: €22
• Cost per missed visit: €130
• Total annual cost: €2.6 million

The Solution

With structured processes, clearer communication, and digital tools, the number of fault reports can be significantly reduced. A 17% reduction, for example, translates into:

• 17,000 fewer fault reports
• 8,500 fewer work orders
• 850 fewer missed appointments

Results

Conclusion

By actively working to optimize the fault reporting process, a large real estate company can save €484,500 every year.

Case 4: Installing Washing Machines and Dryers in Apartments – A Profitable Decision Driven by Tenant Feedback

When tenants are given the opportunity to influence their living environment, the result is not only higher satisfaction but also clear business benefits. This case study from one of Sweden’s largest property owners shows how a simple measure – installing washing machines and dryers in each apartment – led to higher rental income, lower operating costs, and more satisfied tenants.

Background

In a tenant survey conducted in a property with 90 apartments, many residents expressed dissatisfaction with the shared laundry facilities. Several tenants stated they would prefer to have their own washing machine and dryer at home. The property owner decided to explore whether this investment could both improve tenant satisfaction and justify a rent increase.

Increased revenue through rent adjustments

The property owner was able to raise the rent by €20 per month per apartment where a washing machine (€12) and dryer (€8) were installed.

• €20 × 90 apartments = €1,740 per month
• €1,740 × 12 months = €20,880 per year in additional rental income

The total purchase and installation cost was €95,700. With a five-year product warranty and an expected lifespan of around nine years for the appliances, this corresponds to a payback period of 4.5 years.

Reduced operating costs through energy savings

With more tenants doing their laundry at home, demand on the shared laundry facilities decreased. Total energy consumption was estimated to fall by 18,000 kWh per month.

At an electricity price of €0,090 per kWh, this corresponds to:

• 18,000 kWh × €0,090 = €1,620 per month
• €1,620 × 12 months = €19,440 per year in reduced energy costs

Total annual finacial effect

At the same time, the property value increases by approximately €454,000 as a result of the higher rental income.

Additional benefits

Beyond the direct financial impact, the measure also generates several indirect advantages:

• Reduced wear and lower maintenance costs for the communal laundry facilities
• Stronger attractiveness of the property when marketing to new tenants
• Higher customer satisfaction – less frustration related to cleaning, maintenance, and shared laundry schedules
• An overall improvement in the quality of the living environment

Conclusion

By listening to tenants’ needs and delivering tangible improvements to their living environment, the property owner is able to strengthen net operating income through higher revenue, lower costs, and stronger tenant relationships.

This case study demonstrates how a clearly identified tenant need can be turned into profitable business development – creating both short-term financial returns and long-term strategic value.