Absorption is the rate at which rentable space is leased within a market or submarket over a given period of time. Gross absorption measures total square feet leased without regard for vacated space during the same period, while net absorption accounts for vacated space as well. The rates are typically expressed by specific property type and asset class.
For example, if the total amount of retail space in a given submarket is 1,000,000 square feet and 50,000 square feet of space are leased and 20,000 square feet are vacated during the year, then the annual gross absorption rate would be 5.0% (50,000 sf leased divided by 1,000,000 sf total space) while the net absorption rate would be 3.0% (50,000 sf leased less 20,000 vacated equals 30,000 sf net absorption divided by 1,000,000 sf total space).
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Hypothetical example(s) are for illustrative purposes only and are not intended to represent the past or future performance of any specific investment.
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