Industrial KPIs: Releasing Spreads, NOI, Occupancy

Introduction

An industrial REIT can report headline same-store NOI growth of barely 1% and still be one of the fastest-growing names in real estate. The reason sits inside the lease roll: leases signed three, five, or seven years ago at rents far below today's market re-price every time they expire, and that gap is contractually banked, waiting to be harvested. Rexford Industrial, the dominant infill landlord in Southern California, illustrates the point. Across 2025 it has been re-leasing space at comparable rental rate growth of roughly +21% to +26% on a net effective basis and +8% to +15% on a cash basis, even as same-store NOI growth ran only in the low single digits and occupancy held around 96%. The releasing spread, not the NOI line, is where the value shows up first.

This is the core distinction from multifamily. A multifamily landlord works 12-month leases, so its rent roll re-prices almost entirely within a year and the headline trade-out spread captures most of the story. An industrial landlord works multi-year leases, so at any moment a large block of in-place rent is locked below market and rolls off only gradually. The operating KPIs that matter for industrial coverage all flow from that lease structure: releasing spreads (reported two ways), same-store NOI on both a GAAP and a cash basis, occupancy, and the single most forward-looking figure, the embedded lease-to-market spread.

The primary industrial REIT KPIs and their 2025 benchmark levels:

Two pairs in that table deserve attention before anything else: the two NOI lines and the two releasing-spread lines. In each case the cash version and the GAAP version are telling you different things, and an analyst who quotes only one has seen only half the picture. The same-store NOI lens (here roughly +0.7% to +1.9% for Rexford) feeds the FFO and AFFO metrics that REIT multiples are built on; the cash NOI lens (+3.9% to +5.5%) tracks the dividend-covering cash the portfolio actually throws off. For the underlying definition of the income line both versions sit on top of, the property-level NOI and net cash flow mechanics are the foundation.

Industrial Releasing Spread

The percentage change in rent achieved when an industrial lease rolls over, whether as a renewal with the sitting tenant at a new rate or as a new lease with a different tenant after vacancy. It is reported on a cash basis (new starting rent versus the prior in-place rent) and a net effective basis (the full GAAP lease economics, with free rent and escalators averaged across the term, versus the prior lease's net effective rent). The two figures answer different questions: cash asks "how much more is the tenant paying today," net effective asks "how much more is the lease worth over its life."

Cash Versus Net Effective: Why the Same Rollover Produces Two Numbers

The gap between the two figures is not an accounting quirk; it is the rent escalator pattern made visible. A new industrial lease carries a starting rent, then annual bumps (commonly 3-4% in 2025), and often a few months of free rent up front. Cash rent is what the tenant actually pays in the current period. Net effective rent levels the whole stream into one average over the term.

Take a 10-year lease signed at a $9/sqft starting rate with 3% annual escalators. Cash rent in Year 1 is simply the starting rate:

Net effective rent averages every year's contractual rent across the term, lifting the figure to roughly $10.30/sqft:

Both versions of the releasing spread share one structure: the new rent achieved on the rolled lease, measured against the expiring rent on the same basis. Written symbolically, the spread is the proportional gap between the two:

The cash version plugs in starting cash rents on both sides of the fraction; the net effective version plugs in the GAAP straight-line rents on both sides. Now roll that lease at a market rent of $13/sqft. The cash spread compares the new starting rent to the prior lease's expiring rent (the old lease's Year-10 rate after a decade of 3% bumps, $11.74/sqft, not its original $9 start); the net effective spread compares the new lease's averaged economics (a $13 start escalated at 3% averages to roughly $14.90/sqft) to the old lease's averaged economics:

Because the cash spread is measured off the high expiring rent the old lease had escalated up to, it reads structurally smaller, while the net effective spread compares the two leases' lower averaged rents and runs higher. In practice the two diverge by 5-15 percentage points on industrial rollovers. This is why a release that looks spectacular on a cash basis can look merely strong on a net effective basis, and why the GAAP straight-line treatment that drives net effective rent matters for anything that flows into FFO.

The headline same-store NOI line is backward-looking: it reports what already happened. The lease-to-market spread is its forward-looking counterpart, and for industrial it is the single most useful KPI. It measures the cumulative percentage by which in-place leases across the portfolio sit below current market rents. On a single lease, that gap is the mark-to-market, computed the same way the releasing spread is, except the reference point is today's market rent rather than a rent actually achieved on a rollover:

The lease-to-market spread is simply this mark-to-market rolled up across the whole rent roll, weighted by square footage or in-place rent, so it captures the embedded reversion before any lease has actually expired. Every point of that spread is forward NOI that the lease roll will harvest mechanically, with no assumption about future market rent growth required. Best-positioned industrial portfolios were carrying 20-40%+ lease-to-market spreads through 2025; Rexford has run above that range on its Southern California book, where new supply is structurally constrained by land scarcity.

Lease-to-Market Spread

The weighted-average gap between a portfolio's current in-place contract rents and current market rents, expressed as a percentage. A 30% spread means in-place rents would have to rise 30% just to reach today's market, and that uplift is captured contractually as leases expire and re-price. It is the cleanest measure of embedded, near-certain forward NOI growth, because it depends only on existing leases rolling, not on any forecast of where rents go next.

The translation into annual NOI growth is straightforward arithmetic. A portfolio captures roughly the lease-to-market spread multiplied by the share of leases rolling each year:

Apply Rexford's numbers, a spread above 30% and roughly 15-20% of leases rolling annually, and the embedded uplift lands near 4.5% to 6% of NOI per year from re-pricing alone, before any new development, market rent growth, or operating efficiency is added on top. That is the structural reason a name can post a low-single-digit headline same-store figure and still compound NOI at a high-single-digit rate over a multi-year window: the headline reports the blended portfolio in a single year, while the embedded spread is the multi-year tailwind waiting in the leases that have not yet rolled.

This is not a US-only mechanic. The same embedded mark-to-market drives the European logistics REITs, where SEGRO and Tritax in the UK and continental markets disclose their own reversionary rent gaps for exactly the same reason: in a long-lease asset class with rising market rents, the in-place rent roll understates earning power, and the reversion is where the next several years of growth already lives.

Occupancy looks like the simplest KPI on the list, and for industrial it is also the most easily misread. High-quality 2025 portfolios run around 96% occupancy (Rexford has held in the 95.9-96.8% band), with the sector broadly between 94% and 97%. The number that matters more than the level is the speed at which it changes. Because industrial leases run for years rather than months, occupancy is sticky in both directions: a 100 bps move typically takes 6-18 months of differential leasing to play out, against the 3-6 month response time in multifamily. A soft quarter does not crater an industrial REIT's occupancy, and a tightening market does not lift it overnight.

Sub-segment matters more than the blended figure. Last-mile and small-bay portfolios run tighter occupancy with faster lease-up because the tenant pool is deep and the spaces are fungible; big-box portfolios run wider occupancy with longer lease-up because each vacancy is large and the prospective-tenant list is short. That is why infill-focused names like Rexford and Terreno tend to sit at the top of the occupancy range while big-box-weighted portfolios sit lower, a split traced out in the contrast between last-mile logistics and big-box assets. When occupancy moves, the right first question is which segment moved, not whether the headline ticked up or down.

Pulling the strands together, the industrial KPI set rewards an analyst who reads it as a system rather than a list. The headline same-store NOI line tells you what the portfolio earned last year; the cash and net effective releasing spreads tell you how aggressively the lease roll is re-pricing; occupancy tells you how much of the portfolio is actually working and how durable that is given the lease duration; and the lease-to-market spread tells you how much growth is already contracted into the leases that have yet to roll. For any multi-year NOI projection, the discipline that separates a real model from a placeholder is extracting that lease-to-market spread from the disclosures and running it against the actual expiration schedule, rather than trending the headline NOI growth rate forward and hoping it holds. The same coverage lens applied to the peer set, Prologis, Rexford, and Terreno, is laid out in the industrial REIT landscape.