What is absorption in real estate?

Absorption measures how much real estate a market takes up over a defined period. In commercial reports, net absorption usually means the change in occupied space. In a new apartment project, an absorption rate may instead describe the share of newly delivered units rented by a given date. A percentage and a unit count are not interchangeable.

How can demand rise while occupancy falls?

Suppose a market starts the quarter with 900 occupied apartments out of 1,000. At quarter-end it has 940 occupied out of 1,100. Net absorption is positive 40 apartments, yet occupancy fell from 90% to about 85.5% because builders added more apartments than renters took up. Looking at the occupancy percentage alone misses the growth in occupied units.

What should you check in a market report?

Write down the geography, period, unit of measure and starting inventory. Ask whether the report counts signed leases or occupied units: a lease signed in March for a June move-in can land in different reporting periods. NAIOP’s real estate definitions describe net absorption, while the Census Bureau’s SOMA survey follows newly completed multifamily units over time. Use the measure that fits the decision: market demand for an acquisition, or lease-up pace for a new community. An apartment market survey can help explain the difference.