Beyond the Rent Roll: Protecting and Growing NOI in Today’s CRE Market
By Grace Frank
Commercial real estate has always been driven by the numbers. But in today’s market, understanding those numbers requires looking beyond rental rates, occupancy, and purchase price.
Rising operating expenses—particularly insurance—are putting greater pressure on net operating income (NOI). At the same time, owners and investors are taking a closer look at underutilized areas of their properties and asking whether those spaces could generate income, support leasing, or strengthen the overall asset.
Together, these trends point to a larger shift in commercial real estate strategy: the focus is no longer simply on how much income a property generates, but on how durable that income is and where additional value may exist.
Rising Costs Are Changing the Math
Insurance has become one of the more significant and unpredictable operating expenses facing commercial property owners.
Research cited by Real Estate Innovator found that commercial property insurance premiums increased nearly 30% in 2023 alone among the multifamily properties studied. From 2019 through 2024, premiums increased more than 15% annually on average—well beyond the modest annual increases traditionally built into many underwriting models.
For owners and investors, the impact extends beyond a higher insurance bill. Rising operating expenses reduce NOI, which can influence cash flow, debt-service coverage, investment returns, and ultimately property value.
Consider a property where an unexpected insurance increase reduces annual NOI by $20,000. At a hypothetical 7% capitalization rate, that reduction represents approximately $286,000 in indicated property value, assuming all other factors remain equal.
This is why historical financial statements should be viewed as a starting point rather than the full picture. A property's previous insurance expense tells you what the current owner paid. A current quote provides a better indication of what the next owner may actually pay.
Looking for Opportunity Within the Property
Protecting NOI is one side of the equation. The other is identifying opportunities to strengthen it.
As highlighted by The Close, some commercial property owners are looking beyond traditionally leased square footage and reconsidering how underutilized areas can contribute to the performance of an asset.
That does not necessarily mean making dramatic changes. An unused office, excess warehouse space, oversized common area, outdoor space, additional parking, storage, or signage opportunity may have value that is not reflected on the current rent roll.
The right question is not whether every square foot can be monetized. It is whether each part of the property is contributing to the asset’s overall performance.
Could unused space accommodate another tenant or complementary use? Could an amenity help attract or retain tenants? Could a modest improvement make an area more functional or marketable?
Sometimes the greatest opportunities are already within the property—they simply have not been fully recognized.
The New Underwriting Question: How Durable Is the NOI?
Current NOI remains one of the most important measures of commercial property performance, but sophisticated underwriting increasingly requires looking forward.
What happens if insurance increases at renewal? What if taxes or maintenance expenses rise? Are current rents sustainable? Is there unused space? Could the tenant mix improve? Are there opportunities for additional revenue?
This requires both defensive and offensive thinking.
Defensively, owners and investors should identify expenses and risks that could erode NOI. Offensively, they should identify realistic opportunities to strengthen income and improve the property's long-term position.
The strongest opportunities may be properties where both sides of that equation can be improved.
What This Means for Buyers and Owners
For buyers evaluating commercial real estate in Chattanooga and Southeast Tennessee, due diligence should extend beyond reviewing the existing rent roll and historical operating statements.
Current insurance costs, taxes, maintenance requirements, and other operating expenses deserve careful attention. At the same time, walking a property with an eye toward unused or underperforming areas can reveal opportunities that may not immediately appear in the financials.
Owners preparing to sell can benefit from the same analysis. Understanding and documenting the property's expenses while identifying overlooked strengths or future possibilities can help prospective buyers see a more complete picture of the asset.
Not every opportunity needs to be fully developed before a sale. Sometimes simply recognizing and clearly communicating the potential can add valuable context to the investment story.
Looking Beyond the Rent Roll
Today's commercial real estate environment requires a more complete view of property performance.
Protect the income already being generated. Understand the expenses capable of eroding it. Identify the risks that could affect future performance. And look carefully at the property itself for opportunities that may not appear on the rent roll.
For commercial property owners, buyers, and investors throughout Chattanooga and Southeast Tennessee, every dollar of NOI matters—and increasingly, so does every square foot.
Grace Frank
Commercial Real Estate Guidance Rooted in Local Market Knowledge
