What is a Net Absorption and How Does it Measure CRE Performance?

Posted on April 09, 2020

Absorption, or the total square feet of rentable space that is leased and physically occupied during a specific time period, can help investors assess the supply and demand for a particular commercial property, asset class or geographic market.

Net absorption tells investors whether demand is increasing (positive absorption) or decreasing (negative absorption) based on the change in occupied space from one period to the, based on the difference between the total square feet of space tenants moved into, less the total square feet of space that tenants moved out of and vacated during a specific time period. Positive net absorption refers to a situation in which more space is leased than is vacant, whereas negative net absorption occurs when more space is vacant than occupied.

Understanding how to use net absorption to select income-producing investment property requires careful consideration on a wide variety of factors for which investors should seek the assistance of professional real estate advisors.

With offices in Miami, Orlando, New York City and Geneva, the team at Orion works with investors, developers, property owners and brokers through all phases of real estate transactions, from strategic planning and analysis to financing, negotiation, property management and disposition. For more information, call (305) 278-8400 or email info@orionmiami.com.