Total rental income moves every time the fund buys or sells. Like-for-like growth isolates what the asset manager actually achieved.
Like-for-like rental growth compares rental income this period with the last period on the same assets only: those owned and operating throughout both periods, with acquisitions, disposals and developments taken out. On an illustrative seven-asset portfolio whose total rent rises 2.66 per cent, the four like-for-like assets grow by 1.48 per cent, made up of 3.22 per cent from reviews and indexation less 1.74 per cent from a new vacancy.
Worked in full in The Real Estate Asset Manager by Julian R. Sterling, with every figure reproduced in a free workbook.See the book on Amazon →
Total rental income answers the question “how big is the portfolio?”. Like-for-like growth answers “how well is it being managed?”. The first moves every time the fund buys or sells a building. The second only moves when the asset manager wins a review, lets space, loses a tenant or grants an incentive. That is why EPRA's Best Practices Recommendations ask listed property companies to report it, and why an investment committee should ask for it in every quarterly pack.
| Asset | Status | Year 1 (£000) | Year 2 (£000) | Change | Change % |
|---|---|---|---|---|---|
| A | Office, held throughout | 2,400 | 2,472 | 72 | 3.0% |
| B | Industrial, held throughout | 1,800 | 1,890 | 90 | 5.0% |
| C | Retail, held throughout | 1,500 | 1,380 | −120 | −8.0% |
| D | Office, held throughout | 1,200 | 1,260 | 60 | 5.0% |
| E | Industrial, bought July of year 1 | 600 | 1,240 | 640 | 106.7% |
| F | Office, sold March of year 2 | 1,600 | 400 | −1,200 | −75.0% |
| G | Office, development let in year 2 | 0 | 700 | 700 | n/a |
| Total, as reported | 9,100 | 9,342 | 242 | 2.66% |
Keep only assets held and income-producing for the whole of both periods. E was bought part-way through year 1, F was sold in year 2 and G was under development, so all three come out. The set is A, B, C and D.
Year 1: 2,400 + 1,800 + 1,500 + 1,200 = £6,900k. Year 2: 2,472 + 1,890 + 1,380 + 1,260 = £7,002k.
Like-for-like growth = 7,002 ÷ 6,900 − 1 = 1.48 per cent.
With a status column in B, year 1 in C and year 2 in D: =SUMIFS(D:D,B:B,"lfl")/SUMIFS(C:C,B:B,"lfl")-1. Tag the status once per asset in the rent roll, not in the formula.
The like-for-like set is 75.8 per cent of year 1 income and 75.0 per cent of year 2 income. Stating that coverage alongside the growth rate tells the reader how much of the portfolio the number actually describes.
| Movement | £000 |
|---|---|
| Rental income, year 1 | 9,100 |
| Like-for-like: reviews and indexation (A, B, D) | 222 |
| Like-for-like: new vacancy (C) | −120 |
| Acquisition (E) | 640 |
| Development (G) | 700 |
| Disposal (F) | −1,200 |
| Rental income, year 2 | 9,342 |
The bridge is the useful output. Of the £242k increase in reported income, only £102k came from managing the assets the fund already owned, and inside that, the reviews added 3.22 per cent while one vacancy took away 1.74 per cent. The other £140k is transactions: the purchase and the development added £1,340k between them, the sale removed £1,200k, and none of it says anything about how well the buildings were run.
Like-for-like growth has no single legal definition, and the judgement calls move it a long way. Here is the same data under four choices a manager might make.
| Definition | Year 1 | Year 2 | Growth |
|---|---|---|---|
| A to D, assets held throughout both periods | 6,900 | 7,002 | 1.48% |
| A to D plus E, with E's half year annualised to 1,200 | 8,100 | 8,242 | 1.75% |
| C excluded as “repositioning” | 5,400 | 5,622 | 4.11% |
| A to D plus E at reported income | 7,500 | 8,242 | 9.89% |
| C excluded and E included at reported income | 6,000 | 6,862 | 14.37% |
Two stretches, both of which can be dressed up as reasonable, turn 1.48 per cent into 14.37 per cent. Including E at its reported income counts six months of ownership in year 1 against twelve in year 2, so most of its “growth” is just time. Annualising it is better (1.75 per cent) but rests on an assumption about income the fund never received. Excluding C removes the one asset where the manager lost ground.
The usual error is to reclassify an asset out of the like-for-like set after the bad news. A building where a tenant left becomes “under refurbishment” and drops out, and the growth figure improves by 2.63 points without a single extra pound of rent. The test is simple: the exclusion rule should be written down before the period starts, and an asset leaves the set only for a decision taken in advance, such as a development programme approved by the committee.
The second error is to read like-for-like growth as the whole story. A positive figure can hide a shrinking let area if rents rose on the remaining tenants. Pair it with the vacancy rate on the same set, worked in the EPRA vacancy rate, and with the reversion still to capture, as in reversionary potential.
Report three numbers together: the like-for-like growth (1.48 per cent), the coverage of the set (75.8 per cent of prior-year income) and the split between rent movements and occupancy (3.22 per cent and −1.74 per cent).
Isolate the assets held throughout both periods, compare their income, and bridge the reported total to that figure. In this portfolio, reported rent grew 2.66 per cent and like-for-like rent 1.48 per cent, and the difference is entirely buying, selling and building. The book's asset business plan is built on the same discipline, a rent roll that computes the occupational position and keeps contracted and speculative income in separate columns; the free workbook for this case sets it out live.
Reported growth compares total rental income, so acquisitions, disposals and completed developments all move it. Like-for-like growth keeps only assets held throughout both periods. In the worked portfolio, reported rent rises 2.66 per cent while like-for-like rent rises 1.48 per cent, because a sale, a purchase and a development account for the rest.
Not until they have been owned for the whole of both periods compared. Including an asset bought mid-way through year 1 at its reported income counts six months against twelve: in the example it lifts like-for-like growth from 1.48 per cent to 9.89 per cent, with no change in how any building was managed.
Only under a rule fixed in advance, such as a development programme approved before the period. Excluding a building after a tenant leaves flatters the result: removing the vacant retail asset lifts growth from 1.48 per cent to 4.11 per cent, a 2.63 point improvement without any extra rent.
This article is one calculation from The Real Estate Asset Manager. The book takes the same case from first principles to the decision, chapter by chapter, and every figure it prints is a live formula in the free companion workbooks.
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