Why are NOI margins particularly high in logistics?

NOI margins, or Net Operating Income margins, reflect a property's operating income relative to its revenue. In the logistics sector, these margins tend to be particularly high due to several factors that contribute to efficient and cost-effective operations.

The correct choice highlights that logistics properties often operate on lean models, which means they maintain low overhead and operational costs. This reduced expense structure can result from minimal service intensity, meaning that logistics facilities typically do not require extensive services for tenants compared to sectors such as retail or multifamily housing. For example, logistics facilities can often operate with fewer staff and have lower ongoing maintenance needs, which in turn helps keep operating costs down while maximizing income, leading to higher NOI margins.

Additionally, logistics properties are usually designed for efficiency, focusing on essentials like loading areas and storage space, rather than amenities or services. This operational simplicity allows landlords to achieve greater profitability since they can charge competitive rents while keeping their own costs manageable.

In contrast, high tenant turnover rates, high service intensity requirements, and high capital expenditures are typically characteristics that could negatively affect NOI margins, either by increasing costs or by complicating the operational model. Thus, the lean operating models seen in logistics are a primary reason for their attractive NOI margins.