Occupancy Rate
The share of a property's leasable space that is actually rented out, shown as a percentage of total square footage, suites or rooms.
What it is
Occupancy rate measures how much of a property's rentable space is currently under lease. If a landlord owns 100 apartment suites and 93 are rented, occupancy is 93% and vacancy — the mirror image — is 7%. Real estate investment trusts (REITs), which own and rent out portfolios of buildings, report occupancy for the whole portfolio and often break it out by property type or region. "Occupied" and "leased" are not always the same thing: a lease can be signed and counted while the tenant has not yet moved in or started paying, so some REITs publish a leased rate alongside an occupied rate.
Why it matters
Rent is a REIT's revenue, so occupancy is the closest thing it has to a volume figure. Empty space earns nothing while still costing property tax, insurance, utilities and upkeep, so a move in occupancy flows through to net operating income and, from there, to funds from operations — the non-GAAP measure that adds real-estate depreciation back to net income. The figure carries information a single profit number hides, but it has to be read carefully: occupancy can fall because demand for the space weakened, and it can equally fall because a development was just delivered, a partly-let building was acquired, or space was taken offline for redevelopment. Occupancy is not standardised by accounting rules, so definitions differ from REIT to REIT, which limits how cleanly two headline figures can be compared.
How it's calculated
Divide occupied space by total space available to rent, then multiply by 100. Units depend on the asset: square feet of gross leasable area for offices, malls and warehouses; suites for apartments. Hotels are the exception — rooms are sold by the night, not leased, so hotel occupancy is room-nights sold divided by room-nights available over the period. Physical occupancy counts space with a tenant in it; economic occupancy compares rent collected against the rent the portfolio would produce if fully leased, so it reflects free rent and unpaid rent that physical occupancy misses. It is a management-defined metric published quarterly in supplemental disclosure, not an audited statement line.