NOI Calculation Examples: Three Commercial Real Estate Scenarios
Three NOI Scenarios
These examples cover a stabilized retail center (recovery working well), a lease-up office scenario (occupancy driving NOI variability), and a value-add retail property (CAM gap analysis shows where NOI is hiding). All use actual math with realistic figures for 2026.
NOI examples are most useful when they show the full calculation, not just the answer. Each scenario below walks through every line, including the recovery ratio analysis that most operators miss.
Example 1: Stabilized Neighborhood Retail Center
Property: 75,000 sf neighborhood retail, suburban Phoenix. 97.3% occupied. Strong grocery anchor, 14 inline tenants.
Revenue
Base Rent:
| Tenant | SF | Rate/sf/yr | Annual |
|---|---|---|---|
| Grocery anchor | 32,000 | $14.50 | $464,000 |
| Drug store | 8,500 | $20.00 | $170,000 |
| Inline tenants (14) | 32,500 | $25.50 avg | $828,750 |
| Subtotal | 73,000 | $1,462,750 | |
| Vacant | 2,000 | - | - |
Recovery Revenue:
CAM expenses incurred: $312,000 ($4.16/sf on 75,000 sf GLA)
- Anchor: excludes management fee → effective pool share 94.5%; no cap binding
- Drug store: 100% with 3% cap; cap not binding (pool up 2.8% year-over-year)
- Inline: 100% standard
Blended recovery ratio: 95.1% CAM billed: $312,000 × 95.1% = $296,712
Tax and Insurance:
- Property taxes: $245,000 → 100% recovered
- Insurance: $41,000 → 100% recovered
Other: Kiosk rental $9,600, ATM $4,200 → $13,800
Total EGI:
| Line | Amount |
|---|---|
| Base Rent | $1,462,750 |
| CAM Recovery | $296,712 |
| Tax Recovery | $245,000 |
| Insurance Recovery | $41,000 |
| Other | $13,800 |
| EGI | $2,059,262 |
Expenses
| Expense | Amount |
|---|---|
| CAM (incurred) | $312,000 |
| Property Taxes | $245,000 |
| Insurance | $41,000 |
| Management (4%) | $82,370 |
| Non-Recoverable Maint. | $24,000 |
| Legal/Admin | $14,500 |
| Total | $718,870 |
NOI = $2,059,262 − $718,870 = $1,340,392
Recovery ratio: 95.1% | NOI Margin: 65.1% | Value at 6.75% cap: $19.86M
Interpretation: This is a well-run property. The 4.9% unrecovered CAM is almost entirely the anchor's management fee exclusion. Billing is accurate and ratios are strong. At a 6.75% cap, it is worth about $19.9M. Recovering the last $14,861 of CAM through tighter anchor lease negotiation at renewal would add about $220,000 in value.
Example 2: Lease-Up Office Scenario
Property: 95,000 sf Class B suburban office, Charlotte. Currently 72% occupied (68,400 sf). Target: 88% in 24 months.
As-Is NOI
Base Rent: 9 tenants at various rates, average $22.50/sf
- Occupied space revenue: 68,400 sf × $22.50 = $1,539,000
Recovery Revenue:
Lease structure: full-service gross leases with expense stops at $12.50/sf (2022 base year). 2026 actual operating costs: $18.40/sf - tenants pay $5.90/sf in above-stop expenses.
Without gross-up: CAM/above-stop recovery = 68,400 sf × $5.90 = $403,560.
Gross-up provision applies: landlord normalizes to 95% occupancy. The gross-up adjusts the per-tenant denominator so each tenant's share is calculated as if the building were 95% occupied.
Total operating expenses: $18.40 × 95,000 = $1,748,000 Grossed-up expense per sf: $1,748,000 ÷ (95,000 × 95%) = $1,748,000 ÷ 90,250 = $19.37/sf Above-stop per sf grossed-up: $19.37 − $12.50 = $6.87/sf Total billed to occupied tenants: 68,400 × $6.87 = $469,908
Without gross-up: $403,560. Gross-up adds $66,348.
Total As-Is Revenue:
| Line | Amount |
|---|---|
| Base Rent | $1,539,000 |
| Above-Stop Recovery | $469,908 |
| EGI | $2,008,908 |
As-Is Expenses:
| Expense | Amount |
|---|---|
| Total Operating (incurred) | $1,748,000 |
| Management (4%) | $80,356 |
| Non-Recoverable (structural) | $48,000 |
| Total | $1,876,356 |
As-Is NOI = $2,008,908 − $1,876,356 = $132,552
That is a very thin margin: 6.6% of EGI. Office in lease-up at 72% occupancy with full-service leases is capital-intensive. Value at 7.5% cap: $1.77M (on a property likely worth $12M to $15M at stabilization).
Stabilized NOI (88% Occupancy)
Additional 15.2% occupancy = 14,440 sf of new leases at market rent ($23.50/sf, 3 months free rent year 1)
Year 1 effective rent contribution: 14,440 × $23.50 × (9/12) = $254,505 Full-year run rate: 14,440 × $23.50 = $339,340
Recovery on new leases (same expense stop): $6.87/sf × 14,440 = $99,203
Stabilized Revenue (Year 2+): Base Rent: $1,539,000 + $339,340 = $1,878,340 Above-Stop Recovery: $469,908 + $99,203 = $569,111 EGI: $2,447,451
Management fee increases: $97,898
Stabilized NOI: $2,447,451 − $1,876,356 − (additional mgmt $17,542) = $553,553
Value at 7.0% stabilized cap: $7.9M. Dramatically better, but lease-up requires 24 months, $800K in TI for new tenants, and leasing commissions. Value-add math works; stabilized NOI is the target.
Example 3: Value-Add Retail with CAM Gap Analysis
Property: 110,000 sf power center, Atlanta. 89% occupied. Previous owner had loose CAM management.
Current Reported NOI (from seller's financials)
Seller reports: EGI $2,480,000 − Expenses $1,420,000 = NOI $1,060,000 at 7.5% cap = $14.1M asking.
Buyer's CAM Audit Findings
Running the cam-variance-analysis and recovery-ratio-analysis:
Finding 1: Recovery ratio understated Seller reports $520,000 CAM recovery on $640,000 in expenses = 81.3%. Lease analysis shows theoretical maximum (after caps) is 91.4%. Gap: 10.1 percentage points = $64,640/year in missed billing.
Finding 2: Capital items improperly excluded $48,000 in 2024 CAM was parking lot crack-sealing - properly capitalizable, but included in the CAM pool. This will likely face tenant challenge and requires reversal. Remove $48,000 from historical CAM pool.
Finding 3: Property tax appeal pending Current tax $380,000. Appeal filed; expected reduction to $310,000. Affects both expense and recovery line equally - net NOI impact zero, but cash flow timing matters.
Finding 4: One anchor overbilled Home improvement anchor was billed on a per-square-foot basis rather than pro-rata-of-GLA basis per lease. Overbilled by ~$22,000/year. Three-year look-back creates $66,000 in potential credit liability. See cam-overbilling-liability.
Adjusted NOI Analysis
Note: The seller's consolidated financials showed EGI of $2,480,000 and NOI of $1,060,000 - likely netting management fees against recovery revenue and using different expense categorization. The buyer's line-item reconstruction below disaggregates the components to identify the specific adjustments.
| Item | Buyer's Reconstruction | Adjustment | Buyer's Adjusted NOI |
|---|---|---|---|
| Base Rent | $1,820,000 | - | $1,820,000 |
| CAM Recovery | $520,000 | +$64,640 (gap) −$22,000 (overbill) | $562,640 |
| Tax Recovery | $380,000 | −$22,000 (anchor credit accrual) | $358,000 |
| Insurance | $68,000 | - | $68,000 |
| Other | $32,000 | - | $32,000 |
| Total Revenue | $2,820,000 | $2,840,640 | |
| CAM Expenses | ($640,000) | −$48,000 (remove capital) | ($592,000) |
| Taxes, Ins, Mgmt | ($780,000) | - | ($780,000) |
| Total Expenses | ($1,420,000) | ($1,372,000) | |
| NOI | $1,400,000 | $1,468,640 |
Corrected Buyer NOI: $1,468,640
At 7.5% cap (same as asking): $19.6M value vs. $14.1M asking on seller's metrics. The spread is not entirely in buyer's favor: the $22,000 overbilling creates a $66,000 credit liability, and there is TI needed for two upcoming lease renewals. Net of liabilities and near-term capital: fair value around $17.5M to $18.5M.
This is what what-is-cre-finops means in practice. The CRE FinOps discipline applied to CAM reconciliation turns due diligence findings into negotiating power.
How to Use These Examples
Each scenario shows the same structure - base rent, recovery, other income, expenses, NOI - but the analytics differ:
- Stabilized: Focus on recovery ratio optimization and cap rate sensitivity
- Lease-up: Focus on gross-up provisions and stabilized NOI projection
- Value-add: Focus on CAM gap analysis and liability identification
For the formula itself, see noi-formula-calculation-guide. For a step-by-step calculation guide, see how-to-calculate-noi-real-estate. For valuation from NOI, see noi-to-value-commercial-property. And for the overall NOI context in CRE, start with net-operating-income-real-estate-guide.
Run your own scenarios using the NOI impact calculator - input your CAM pool, current recovery ratio, and target cap rate to see the value at stake from recovery improvement.
Sources
Frequently asked questions
Can you show a worked NOI calculation example for a retail property?
Yes. For a 75,000 sf stabilized retail center: Base Rent $1,462,750 + CAM Recovery $296,712 (95.1% of $312,000 pool) + Tax Recovery $245,000 + Insurance Recovery $41,000 + Other $13,800 = Total EGI $2,059,262. Minus expenses: CAM incurred $312,000 + Taxes $245,000 + Insurance $41,000 + Management (4%) $82,370 + Non-Recoverable $24,000 + Legal/Admin $14,500 = Total Expenses $718,870. NOI = $2,059,262 minus $718,870 = $1,340,392. Recovery ratio: 95.1%. At 6.75% cap rate: Implied Value $19.86M. The 4.9% unrecovered CAM ($15,288/year) represents $226,000 in value at this cap rate.
How do you calculate NOI during a lease-up period?
Lease-up NOI modeling requires separating in-place revenue from pro forma revenue for vacant space. Calculate NOI on leased space only (actual revenue), then add: projected lease-up revenue with a probability weight for signing timing, minus projected TI and leasing commission costs amortized over the lease term. The gap between as-is NOI and stabilized NOI is the lease-up value creation opportunity. For a property at 74% occupancy targeting 92%, each 10 percentage points of occupancy gain at market rent typically adds 8 to 12% to NOI. The gross-up provision in existing leases partially offsets the income lost to vacancy by allowing higher billing to occupied tenants.
What is a good NOI margin for a commercial property?
NOI margin (NOI divided by Effective Gross Income) varies by property type and lease structure. For NNN retail with full recovery: 85 to 92% (low expenses on landlord's books). For community retail with standard CAM: 55 to 68%. For Class A office: 50 to 62%. For industrial with modified gross leases: 65 to 75%. For multi-tenant strip centers: 58 to 65%. A margin well below the range for your property type suggests either high non-recoverable costs, poor recovery ratio, or structural lease issues. A margin above the range might mean under-spending on maintenance. Check deferred maintenance before interpreting a high NOI margin as a positive.
How do I calculate NOI for a value-add property?
Value-add NOI has two layers: as-is NOI (current leases, current recovery rates) and pro forma NOI (stabilized leases, corrected recovery rates, renovated rents). Calculate as-is NOI using the standard formula. Then model the pro forma by: (1) projecting lease renewals at market rent, (2) adjusting the CAM pool for any renovation-related cost changes, (3) improving recovery ratio to target (95%+ for most retail), and (4) adding new lease revenue for vacant space. The difference between as-is and pro forma NOI, divided by the required investment to achieve it, is your return on incremental investment. This is how value-add underwriting works, and it makes recovery ratio improvement one of the highest-ROI actions available.
What's the NOI calculation for a property with percentage rent?
Add percentage rent as a separate revenue line after base rent and before recoveries. Percentage Rent = (Gross Sales minus Breakpoint) x Percentage Rate, for each tenant where gross sales exceed the breakpoint. For a tenant with $2.8M in gross sales, $2.0M natural breakpoint, and 5% rate: Percentage Rent = ($2.8M minus $2.0M) x 5% = $40,000. Include this in the NOI revenue stack. Then total NOI = Base Rent + All Recovery Revenue + Percentage Rent + Other Income minus All Operating Expenses. For more on percentage rent mechanics, see the percentage-rent-explained resource.