What is net operating income (NOI)?

Net operating income measures what a commercial property generates after covering its day-to-day operating costs but before accounting for debt payments or taxes. Agents and investors in the London, Ontario commercial market use NOI to understand a property's true earning capacity independent of how it is financed.

To calculate NOI, you subtract operating expenses from gross rental income. Operating expenses include property taxes, insurance, maintenance, utilities, property management fees, and repairs. What you exclude matters just as much: mortgage payments, principal and interest, capital improvements, and income taxes do not factor into NOI.

NOI matters because it strips away the noise of individual financing arrangements and allows direct comparison between different properties. Two commercial buildings might have identical operating performance, but different NOI outcomes if one is financed with a larger down payment or better interest rate. By isolating the property's income from its financing, NOI gives you the real picture of operational performance.

London, Ontario commercial real estate professionals rely on NOI to calculate cap rates (NOI divided by property value), debt service coverage ratios, and other metrics that shape purchase decisions and valuations. Whether you are evaluating an office building on King Street or a retail property in the downtown core, NOI is the foundation for assessing whether a deal makes financial sense. Commercial real estate agents in London use this metric as a standard measure for due diligence and investment analysis.