REIT Screening Checklist: 8 Metrics to Track

The 8-Metric Framework

A screen does not pick shares. Its job is to tell you which question to ask about each name, so that the twenty hours of work go to the four REITs where the answer might change your mind.

Eight metrics cover most of the ground: occupancy, same-store NOI growth, AFFO payout ratio, net debt to EBITDAre, weighted average lease term, P/FFO, premium or discount to NAV, and the spread between a development’s yield on cost and the market cap rate.

Two warnings before the thresholds, because both of them are ways this page can be used to reach a wrong answer.

A flag is a question, not a verdict. Every red below has a benign explanation available. A high payout ratio can be a REIT at the bottom of a leasing cycle. A wide NAV discount can be the market seeing something your cap rate does not. The value of the checklist is that it stops you skipping a dimension, not that it grades the company.

Almost none of these levels are permanent. A leverage band or a multiple that was right at a 1.5% ten-year bond yield is wrong at 4.5%, and a threshold that fits a warehouse landlord will misjudge an office one. Where a number below has a driver behind it, the driver is the part to keep.

Metric 1: Occupancy

Occupancy is the most immediate indicator of asset quality and demand fundamentals. It is also the one most often compared across property types, which is where it goes wrong: each type has a different amount of space standing empty in normal conditions, so the thresholds only mean anything within a column.

Thresholds by Property Type

Property Type	Green (Good)	Yellow (Caution)	Red (Red Flag)
Industrial	Above 95%	90–95%	Below 90%
Multifamily	Above 94%	90–94%	Below 90%
Office	Above 90%	85–90%	Below 85%
Retail (prime)	Above 92%	85–92%	Below 85%
Retail (secondary)	Above 88%	80–88%	Below 80%
Data centre (utilisation of installed capacity)	Above 80% and growing	75–80%	Below 75%, or falling
Self-Storage	Above 90%	85–90%	Below 85%

Two of those rows need a word of explanation. Office looks lenient beside industrial and it is not: listed office REITs averaged around 85% occupancy through 2025, so 85% is the middle of the office peer group rather than a pass mark. Data centres quote something different again, the share of installed power and cabinet capacity in use, and operators deliberately hold headroom for tenants to expand into. An 80% figure there is not the same measurement as a 95% warehouse figure and should never be set against it.

What to Look For

Green: Occupancy trending flat or up. New leasing activity at same or higher rents. Competitive supply growth is manageable.

Yellow: Occupancy declining 100–200 bps (basis points, hundredths of a per cent) year-over-year. Market is softening or new supply is coming online. Monitor for further deterioration.

Red: Occupancy down more than 200 bps; the portfolio is losing tenants faster than it is filling space. This often precedes NOI pressure, and it is the point at which the dividend becomes a live question.

The gap between leased and occupied

Most REITs publish two occupancy figures. The leased rate counts space where a lease has been signed; the occupied rate counts space where the tenant has actually moved in and started paying. The leased number is the higher of the two and it is the one that goes in the press release. A gap of one to three points is routine, since fitting out takes months. A gap that keeps widening means leases are being signed faster than tenants are arriving, and the rent behind them has not yet reached the income statement.

Occupancy on its own also says nothing about price. A landlord can buy a percentage point with free rent and a generous fit-out allowance, and the reported figure looks identical to occupancy won on rent. Where the REIT discloses net effective rent change on renewals, read that first.

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Metric 2: Same-Store NOI Growth

Same-store (or same-property) NOI growth isolates operating performance from portfolio composition changes. It is the most important metric for assessing pricing power and cost control.

Read it against two things rather than against a fixed bar. The first is expense inflation: NOI growth of 2% while operating costs rise 4% means rents are losing ground, and in a gross lease the landlord absorbs that gap directly. The second is what market rents in that property type are doing, because a REIT growing NOI at 2% in a market growing rents at 5% is losing share of its own sector.

Thresholds

Property type	Green (Good)	Yellow (Caution)	Red (Red Flag)
Industrial	Above 3%	1–3%	Below 1%
Multifamily	Above 2%	0–2%	Below 0%
Office	Above 0%	-3% to 0%	Below -3%

Industrial REITs have generally run same-store NOI at 3% to 5%, split between contractual escalators and the mark-up captured when a lease rolls. Office has hovered near zero, with better gateway portfolios modestly positive and weaker secondary ones negative. That difference is why the same growth number lands in a different column depending on the column heading.

What to Look For

Green: Rent growth exceeds expense inflation. Tenant rollover is happening at higher rents or occupancy is improving. This is the sign of a REIT with pricing power.

Yellow: Flat to modest negative same-store NOI. Likely due to competitive new supply, expense inflation outpacing rents, or tenant downsizing. Not immediately dangerous, but concerning if sustained.

Red: Same-store NOI below the property type’s red threshold above. That usually points to either structural headwinds (the office demand reset, weaker retail formats) or a supply wave the REIT is competing against. Check which, because one recovers and the other does not.

Example

An office REIT reports a 2.5% same-store NOI decline. Office fundamentals are indeed weak, but -2.5% sits inside the yellow band for that property type. An industrial REIT with -2.5% same-store NOI would be a red flag, because its peers are growing at 3% to 5%.

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Metric 3: AFFO Payout Ratio

AFFO payout ratio is the percentage of AFFO per share paid out as dividends, and it is the most direct measure of dividend safety. It also rests on the softest number on this page.

Nareit defines FFO. Nobody defines AFFO. It starts from FFO and deducts the recurring cash a landlord spends keeping the portfolio let, mainly maintenance capital, tenant improvements, leasing commissions and straight-line rent, but each company draws those lines itself. The split between maintenance capital and growth capital is the company’s own call, no auditor rules on it, and growth capital never reaches AFFO. So a higher AFFO is not automatically a better one, and two payout ratios from two REITs are rarely built the same way. Our FFO vs AFFO guide works through the bridge and shows how far a modest change in the maintenance capital rate moves the answer.

The practical consequence for a screen: rank on the payout ratio, then read each company’s own reconciliation before you believe the ranking.

Thresholds

Payout Ratio	Assessment	Risk Level
Below 70%	Conservative; strong coverage for growth capex	Green
70–85%	Where most well-run REITs sit	Green
85–90%	Tight; little room for a bad leasing year	Yellow
Above 90%	Almost nothing spare, on an estimated number	Red

What to Look For

Green: Payout below 85%. A REIT paying out 80% of AFFO can absorb a 20% fall in AFFO before the dividend exceeds it, and has room to raise the dividend if AFFO grows.

Yellow: Payout of 85% to 90%. Cover is real but thin. At 90%, a 10% AFFO shortfall takes the payout to exactly 100%.

Red: Payout above 90%. Remember what sits underneath the number: the maintenance capital deduction is an estimate, and a company using a rate at the low end of its property type’s range reports a flattering payout without anything changing on the ground. Above 90% the questions worth asking are:

• Is occupancy declining (Metric 1)?
• Is same-store NOI negative (Metric 2)?
• Is a significant lease maturity approaching (Metric 5)?
• Is refinancing risk rising (Metric 4)?

If the answer to two of those is yes, the dividend is a forecast rather than a fact.

Example

A retail REIT reports AFFO per share of $2.50 and a dividend of $2.15, so a payout of 86%. Occupancy is trending down (Metric 1, yellow), and same-store NOI is -1.5% (Metric 2, yellow). The cover is real, but a 10% AFFO shortfall would take the payout to 96%, and two of the operating metrics are already pointing at that shortfall.

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Metric 4: Net Debt to EBITDAre

Net debt to EBITDAre measures leverage and how long it would take the portfolio’s earnings to repay the borrowing. EBITDAre is Nareit’s REIT version of EBITDA: it adds back property depreciation and strips out gains and losses on property sales, so one company’s figure means the same as another’s. Use net debt, after cash, rather than gross.

Thresholds

Net debt / EBITDAre	Assessment	Risk Level
Below 4.5x	Conservative; balance sheet is an advantage	Green
4.5–5.5x	Where most listed equity REITs sit	Green
5.5–6.5x	Elevated; the balance sheet starts to constrain decisions	Yellow
Above 6.5x	Refinancing and covenant risk are live	Red

What a REIT can carry depends on how contractual its income is. A net lease landlord with twelve years of investment-grade rent locked in can run leverage that would be reckless at an office or hotel REIT, where the income has to be re-won every few years. Move the threshold with the income, not with the sector average.

The maturity schedule matters more than the ratio

Leverage becomes a problem on a date. A REIT at 6.0x with staggered maturities and nothing large due for five years has time; the same REIT with a quarter of its debt due next year does not, and the size of the problem is the gap between the coupon it is paying and the rate at which it can refinance. Replacing 3% debt with 6% debt halves the interest cover on that slice.

So read three things together: the ratio, the maturity ladder (no more than about 20% of debt due in any single year), and interest coverage, meaning EBITDAre divided by interest expense. Above 3x is comfortable; below 2x and refinancing at market rates becomes genuinely hard.

What to Look For

Green: Below 5.5x with staggered maturities and interest coverage above 3x.

Yellow: 5.5x to 6.5x, or a lower ratio with a maturity cliff inside two years. Check what the maturing debt costs today against what it will cost to replace.

Red: Above 6.5x with maturities approaching. The options from here are a dividend cut, an equity raise at a depressed price, or asset sales into a market that knows the REIT is selling. None of them is good, which is why the market usually prices this in before the announcement.

A note on secured debt

It is often said that REIT leverage is safer than corporate leverage because the debt is mortgage debt secured on buildings. That is not how large listed equity REITs are funded. The investment-grade names borrow mainly through unsecured bonds and revolving credit facilities, which is what lets them buy and sell buildings without asking a lender’s permission.

Heavy secured mortgage debt is usually a sign of the opposite: a REIT that cannot access the unsecured market on reasonable terms. It also encumbers the best assets, so the unsecured lenders behind it have a claim on whatever is left. Where a REIT’s borrowing is mostly secured, treat it as a signal about its access to capital rather than as reassurance about the collateral.

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Metric 5: Weighted Average Lease Term (WALT)

WALT is the average time until the rent roll has to be re-won, weighted by rent. Most screens treat a long WALT as safety and a short one as risk. That is only true half the time, and getting the direction wrong here is expensive.

The question a lease expiry raises is not whether the rent survives. It is what the rent does next, and what it costs to get there.

In-place rents versus market	A short WALT means	A long WALT means
Below market (industrial through the 2020s)	The uplift is collected sooner. Expiry is an upside event	The uplift is locked away for years while the tenant keeps it
Above market, or expensive to re-let (much of office)	The reset arrives sooner, and each roll costs capital	The bill is postponed, not reduced

Industrial is the clean case. Prologis reported in-place rents around 17% below market in mid-2026 and a 36.9% rise in net effective rent on leases signed that quarter. Every expiry converts part of that gap into cash, for the price of a repaint. A short WALT there is an asset.

Office runs the other way, and it is also the longer of the two, which surprises people. Institutional office leases run seven to ten years against roughly three to seven for warehouse space; BXP’s in-place leases averaged about 7.6 years remaining in early 2026. A long office WALT delays the day the landlord funds the next fit-out, at $50 to $120 a square foot plus commission plus free rent. It does not make that day cheaper. Our industrial vs office guide works the numbers through.

What to compute from the expiry schedule

Not the percentage of rent expiring. Multiply that percentage by the square footage behind it, then by the REIT’s own disclosed cost per square foot of re-letting. Set the product against operating cash flow and undrawn credit. That is the test, and it is the reason two REITs with identical WALTs can face completely different problems.

What to Look For

Green: A short WALT where in-place rents sit below market and re-letting is cheap. Or a long WALT where the tenants are investment grade, the rents are at or below market, and the escalators are contractual.

Yellow: A maturity spike, say a quarter of the rent expiring in one year, in a property type where rents have stalled. Check the rent spread the REIT is achieving on recent renewals, since that is the best available forecast of the next batch.

Red: A concentrated expiry schedule at a landlord whose re-letting costs are high. If the top ten tenants are more than 30% of rent and several roll within two years, one negotiation moves the whole income statement. Office concentration runs far higher than industrial: Kilroy Realty’s top ten were 54% of annualised base rent, against Prologis’s top ten at 15.2%.

Property-Type Context

• Industrial: typically 3 to 7 years; Prologis reported about 4.0 years in mid-2026. Short by design, and rents roll up
• Office: 7 to 10 years for institutional-quality space. The longest of the major types, and the most expensive to roll
• Multifamily: about a year. WALT is not a useful metric here; read rent spreads and turnover instead
• Retail: 3 to 5 years for smaller units, far longer for anchors and net lease formats

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Metric 6: P/FFO Multiple

Price divided by FFO per share is the sector’s standard relative valuation metric, for one reason: Nareit defines FFO, so one REIT’s figure is genuinely comparable with another’s. It is not a complete valuation, because it says nothing about growth or about how much capital the buildings consume.

Start with the relationship it sits in. A cap rate divides income by value; a P/FFO multiple divides value by income. They are the same statement inverted, so a low cap rate always means a high multiple. Industrial’s tight cap rates and its high multiples are one fact stated twice, not two pieces of evidence.

Multiples vary by property type, and the range is wide

Nareit’s Q1 2026 tracker put the implied cap rate on listed industrial REITs at 5.2% and on office REITs at 7.7%. Follow that through to multiples and the ordering falls out:

• Industrial has traded in the high teens to low twenties of forward FFO, with Prologis at the top of that range
• Data centres trade higher still, on the strength of AI-driven demand
• Multifamily and self-storage sit in the middle
• Office has traded in the high single digits to low teens; BXP has changed hands around 8x its 2026 FFO guidance
• Retail spans the widest range of any type, from high single digits for weaker enclosed malls to the mid-teens for grocery-anchored and net lease portfolios

Treat these as an ordering rather than as levels. Every one of them moves with the risk-free rate, and a table written at a 1.5% ten-year bond yield would look nothing like one written at 4.5%.

The two ways this metric is misused

Comparing across property types. An office REIT at 8x is not cheaper than an industrial REIT at 18x. The cap rates, the growth trajectories and the capital intensity are all different, and the multiple gap is the market pricing exactly that.

Ignoring what FFO leaves out. FFO does not deduct the capital spent keeping buildings let, and that capital is far larger for office than industrial. Take an industrial REIT at 18.0x FFO keeping 70 cents of each FFO dollar as AFFO, against an office REIT at 8.1x keeping 52 cents. On price to AFFO they are 25.7x and 15.6x. The gap goes from better than two to one down to about 1.6 to one. Office is still cheaper; it is nowhere near as much cheaper as the headline multiple suggests.

What to Look For

Green: In line with or below the peer group in the same property type, where FFO growth is holding up.

Yellow: Above the property-type peer average with no visible growth premium to explain it.

Red: Well above the peer group, say 14x where the peers trade at 11x, while same-store NOI is falling. Either the market knows something the operating metrics have not shown yet, or the premium is left over from a period that has ended. Both are worth resolving before buying.

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Metric 7: NAV Premium or Discount

NAV is the estimated market value of the REIT’s property, plus development, joint ventures and non-property assets, less net debt and preferred equity, divided by diluted shares. Comparing the share price to it asks whether the stock market and the property market agree.

NAV per share = (property value + development, JV and other assets − net debt − preferred equity) / diluted shares

Property value comes from direct capitalisation: NOI divided by a cap rate, segment by segment. Our how to calculate NAV guide works a full build, and the cap rates by property type guide has the ranges to feed it.

Know the size of your own error bar first

This is the part that makes NAV screens dangerous. A cap rate error hits the gross property value, but debt does not move with cap rates, so the entire error lands on the equity. Fifty basis points across a portfolio moves property values by roughly 8%. At 40% loan-to-value that is a 13% move in NAV per share; at 60% it is close to 20%.

Fifty basis points is well inside the range two reasonable analysts would argue over. So a 10% discount to your NAV is not a signal. It is noise from your own cap rate assumption, and a REIT that looks 10% cheap becomes fairly valued if you were 40 bps too tight.

Thresholds

Price versus NAV	What the market is saying	Risk Level
Premium above 10%	Growth, leasing momentum or management quality is in the price. Test those assumptions	Yellow
Premium of 0–10%	Modest premium; broadly agreeing with your cap rates	Green
Discount of 0–10%	Inside the error bar on your own assumptions. Not a signal	Green
Discount above 10%	A real disagreement about cap rates, about the capital the buildings will need, or about the people running them. Establish which before treating it as cheap	Yellow

There is no red row here, and that is deliberate. A discount is not a defect. It is the market holding a different cap rate from yours, and it is right often enough that the discount alone tells you nothing about which of you to back.

Turn the discount back into a cap rate

The useful move is to work out what the market is assuming. Add net debt to the market capitalisation, strip out development and other non-stabilised assets, and divide stabilised NOI by what is left. That gives you the market’s implied cap rate against yours. Almost every NAV disagreement resolves into a few tens of basis points once you push it this far, and the question stops being “is it cheap” and becomes “which of these two rates is the better read on this portfolio”.

What to Look For

Green: Trading within about 10% of NAV in either direction, with occupancy and same-store NOI holding up. The two lenses agree.

Yellow: A discount of more than 10% alongside green operating metrics. This is where opportunities live, but resolve the cap-rate question first: if the office segment is heading into a re-letting cycle the market has priced and you have not, the market is right and there is no discount.

Yellow: A premium of more than 10% alongside yellow or red operating metrics. Growth assumptions are carrying the price while the operating data is not supporting them yet.

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Metric 8: Development Yield Spread

Development creates value when a REIT can build an asset for less than the market will pay for it once let. The test is the gap between the yield on cost (stabilised NOI divided by total project cost) and the market cap rate for that finished asset in that market.

Development yield on cost = stabilised NOI / total project cost Spread = yield on cost − market cap rate for the completed asset

The comparison has to be like for like. Both sides are unlevered property yields. Setting a development yield against the REIT’s FFO yield on its own share price compares an asset return to an equity return and produces a number that means nothing.

Thresholds

Spread over the market cap rate	Assessment	Risk Level
Above 200 bps	Strong; comfortably pays for construction and lease-up risk	Green
100–200 bps	Where profitable industrial and residential development sits	Green
0–100 bps	Thin. Little margin for a cost overrun or a slower let	Yellow
Negative	Building for less than it costs. Growth is being bought with shareholders’ money	Red

The spread has to pay for something real: two or three years with no income, construction cost inflation the REIT cannot fully contract away, and the possibility the building lets slowly or below the assumed rent. That is why 100 bps is a floor rather than a target.

It also compresses from both ends when rates rise. Cap rates widen while construction costs stay where they are, so a pipeline underwritten at a 200 bps spread can be at 50 bps by completion, on projects that cannot be stopped. Check when the pipeline was committed, not just what it is projected to yield.

Example

An industrial REIT is building a distribution centre for $180 million all in, and expects a stabilised NOI of $12.6 million once let.

• Yield on cost: $12.6M / $180M = 7.0%
• Market cap rate for a comparable stabilised asset: 5.5%
• Spread: 150 bps

Value on completion is $12.6M / 0.055 = $229 million, against $180 million spent. The REIT has created $49 million, a margin of 27% on cost. That is the size of the prize, and it is why industrial REITs keep starting projects while almost no speculative office is being built: an office tower stabilising at 5.5% to 6.0% into a market pricing listed office at 7.7% turns a dollar of cost into less than a dollar of value.

What to Look For

Green: Spread above 100 bps, with the pipeline substantially pre-let and completions inside two or three years.

Yellow: Spread of 50 to 100 bps, or a healthy spread on projects completing more than five years out, where the cap rate at completion is anyone’s guess. Also yellow when development runs above roughly 30% of portfolio value: the REIT is a builder with a rent roll attached, and should be judged accordingly.

Red: A negative spread, or a thin one on a large committed pipeline. The cash is going into buildings that will be worth less than they cost, and the projects are usually too far along to abandon.

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Bringing It Together: A Screening Template

Run the eight in an order that eliminates cheaply before it investigates expensively.

1. Occupancy (Metric 1): Against the threshold for that property type, never across types. Set aside anything falling more than 200 bps a year.

2. Same-store NOI (Metric 2): Against expense inflation and against what that property type is doing. A yellow here is a reason to read the market, not to reject the REIT.

3. AFFO payout (Metric 3): Above 90% and the dividend depends on things going right. Read the company’s own AFFO reconciliation before comparing its ratio to anyone else’s.

4. Net debt to EBITDAre (Metric 4): Then go straight to the maturity ladder, which is where leverage actually bites.

5. WALT (Metric 5): Work out which direction the leases roll. Short is good where rents are below market and re-letting is cheap; the reverse where it is not.

6. P/FFO (Metric 6): Within the property type. Then check AFFO as a share of FFO, because that is what decides whether the multiple is comparable at all.

7. NAV (Metric 7): Convert the discount into a cap-rate disagreement. Under about 10% it is inside your own error bar.

8. Development spread (Metric 8): Yield on cost against the market cap rate. Check how much of the balance sheet is committed to it.

No single metric tells the full story. The value of a checklist is that it forces you to look at dimensions you might otherwise skip. Three or more flags in combination is a stronger signal than any one metric in isolation, because the failures tend to arrive together: the leases roll, the capital bill lands, the payout tightens and the refinancing comes due in the same eighteen months.

And the thresholds above are starting points, not rules. An office REIT at 85% occupancy is average for its peer group; an industrial REIT at 85% is in trouble. Context is not a caveat on this page. It is the method.