Jun 29, 2026
By Fernando Campos
When a company analyzes an industrial property in Costa Rica, it usually compares how much it would pay in rent against how much it would cost to buy it. That comparison is useful, but it may fall short if the profitability of the asset, the use of capital, the location, and the company’s long-term strategy are not also reviewed.
The NOI, or net operating income, shows how much income a property generates after deducting the operating expenses of the property itself. In simple terms, it helps answer a key question: how much does this asset really produce before debt, taxes, and depreciation?
The basic formula can be summarized as follows:
NOI = rental income – property operating expenses
An important point is knowing what NOI includes and does not include. In general, this indicator considers the property’s operating income and deducts the expenses necessary to keep it generating rent.
Normally included in NOI | Normally not included in NOI |
Base rent for the property | Principal and interest payments on loans |
Operating expense reimbursements, if applicable | Owner’s income tax |
Security, cleaning, administration, and ordinary repairs | Depreciation, amortization, and dividends |
Insurance and municipal taxes, if assumed by the owner | Legal expenses, purchase closing costs, or structural renovations |
Estimated vacancy or uncollectible amounts when projecting cash flow | Personal expenses or expenses unrelated to the property |
The composition of NOI may vary depending on the type of contract. In some industrial leases, the tenant assumes certain expenses such as maintenance, insurance, or municipal taxes; in others, those costs remain partially or fully with the owner. Therefore, before comparing CAP Rates, it is advisable to review whether the NOI used is truly comparable with the local market.
In industrial facilities, flex warehouses, and logistics centers, this detail matters greatly: two properties with the same monthly rent may have different NOI if one requires more maintenance, insurance, administration, or non-recoverable improvements.
The CAP Rate, or capitalization rate, makes it possible to estimate a property’s value based on that operating income. In other words, it shows the return a buyer would expect from acquiring a rental-generating property.
Estimated property value = annual NOI / CAP Rate
For example, if an industrial property has an estimated annual NOI of USD 300,000, the value may change significantly depending on the CAP Rate used:
Scenario | CAP Rate | Estimated property value |
Conservative | 10.50% | USD 2,857,000 |
Intermediate | 9.75% | USD 3,077,000 |
More competitive | 9.00% | USD 3,333,000 |
The interpretation is simple: when the CAP Rate decreases, the property value increases. This usually happens when the market perceives lower risk, a better location, more stable contracts, higher-quality infrastructure, or a stronger tenant.
Conversely, a higher CAP Rate may reflect greater risk: short-term contracts, possible vacancy, the need for additional investment, a less strategic location, or uncertainty about income continuity.
Buy or lease?
Buying may be convenient when the company has a stable operation, plans to remain in the same location for many years, and wants to build equity. It may also make sense when the property price is aligned with the income it generates, the asset’s risk, and the reality of the industrial corridor where it is located.
However, buying also means tying up capital. That money could be used for inventory, machinery, technology, commercial expansion, or working capital. In addition, the owner assumes maintenance, insurance, taxes, improvements, and the risk of a future sale.
Leasing, on the other hand, provides greater flexibility. It may be a better option if the company is growing, is not sure how much space it will need in the future, is evaluating different areas of the Greater Metropolitan Area, or prefers to preserve liquidity for operations. It also reduces direct exposure to real estate risk.
The question should not only be: “how much do I pay in rent?” The right question is: is it better to use my capital to buy property or to grow my business?
Other models that may be analyzed
Between leasing and buying, there are intermediate structures that may better fit each company’s reality:
Model | When it may work |
Traditional lease | When flexibility and a lower initial investment are needed. |
Direct purchase | When the location is strategic and the company has a long-term presence. |
Build-to-suit | When a custom-designed facility is needed, but developed by a third party. |
Lease with purchase option | When the company wants to operate first, validate the location, and leave open the possibility of acquiring the property later. |
Sale & leaseback | When a company sells its own property to free up capital and continues using it as a tenant. |
Real estate financial leasing | When a financing structure linked to the use of the asset is sought. |
Own development | When the company has very specific needs and a long-term horizon. |
Each model has different effects on cash flow, debt, taxes, operational flexibility, and financial reporting. Therefore, the decision should be reviewed from a financial, legal, accounting, tax, and strategic perspective.
The accounting effect of leases should also be considered. Under IFRS 16, many lease contracts may require recognition of a right-of-use asset and a lease liability. This may affect financial indicators, debt levels, and the interpretation of financial statements.
Decision criteria
Before buying or leasing, it is advisable to review at least the following points:
Criterion | Key question |
Expected permanence | Does the company need that property for three, five, ten years, or more? |
Liquidity | Would buying limit capital needed to operate or grow? |
Location | Is the property located in a strategic industrial corridor of the Greater Metropolitan Area, a free trade zone, or a relevant logistics point? |
Flexibility | Could the company need more or less space in the future? |
Financing | Does debt improve or pressure cash flow? |
Maintenance | Who assumes repairs, improvements, and insurance? |
Market risk | What happens if demand decreases or the operation changes? |
Exit value | Would the property be easy to sell or lease to third parties? |
NOI and CAP Rate help organize the financial conversation, but they do not replace business analysis. An industrial facility is not only a real estate asset; it may be a critical part of the operation, logistics, distribution, and growth strategy.
Buying may build equity, but it reduces liquidity. Leasing provides flexibility, but it does not create ownership. Intermediate models, such as build-to-suit, sale & leaseback, or real estate leasing, may offer more balanced solutions.
The best decision is not always the cheapest in the short term. It is the one that protects the operation, preserves the necessary liquidity, and aligns with the company’s long-term strategy in the Costa Rican market.
References
Investopedia. Net Operating Income (NOI) and real estate valuation.
Investopedia. Income Approach: What It Is, How It’s Calculated, Example.
Colliers. LATAM Cap Rates Report.
Newmark. Costa Rica Industrial Market Report.
CBRE. Industrial and Logistics Market Reports.
International Accounting Standards Board. IFRS 16, Leases.
Central Bank of Costa Rica. Economic indicators and reference rates.
Ministry of Finance. Tax regulations applicable to leases, transfers, and real estate assets.