What factor does the Multiple on Invested Capital (MOIC) depend on in the office sector?

The Multiple on Invested Capital (MOIC) is a key metric used to evaluate the performance of real estate investments, particularly in the office sector. It measures the total return on capital invested in a property relative to the initial investment. Successful leasing stabilization is crucial because it signifies that the property has achieved a stable occupancy rate and consistent cash flows from tenants. This stability directly impacts the asset's valuation, as investors look for properties that can generate reliable income streams over time.

When leasing stabilization occurs, it typically leads to an increase in property value, as well-leased buildings present less risk to investors. Occupied spaces can demand better financing terms, potentially enhancing the overall financial performance of the property. Thus, a stable income from successfully leased spaces contributes directly to the MOIC by improving cash flow and maintaining or increasing distribution to investors, aligning profits with the capital invested.

In contrast, while market demand, rental price increases, and regulatory approvals are also important factors in the overall health and valuation of real estate, they do not have as direct an impact on MOIC as successful leasing stabilization does. These aspects can fluctuate based on various external conditions and may not immediately reflect on the returns unless there is also successful leasing.