Gross Absorption 2021-01-04 08:00:00

Gross Absorption

Gross absorption measures total square feet absorbed or 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% (calculated as 50,000 sf leased divided by 1,000,000 sf total space).

It’s important to point out that some people use gross absorption for entire markets. In this context, they are counting the inventory of homes or commercial properties. That is a very different metric than what we’re referring to here.

How can gross absorption be used? Gross absorption isn’t a measure of net growth or trend. For that, you’ll need net absorption. Net absorption can provide trend information. Gross absorption does provide useful information about growth. Still, it is only part of the picture and shouldn’t be used in isolation or without a full understanding of what gross absorption means.

Different sources may measure gross absorption differently. Check with the source before utilizing any numbers. For example, some sources may not include sublets, leaves renewals, or spaces that are still under development. At the end of the day, gross absorption only tells you the amount of leased space. It can be helpful for seeing areas that were absorbed more than others.

 


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