# Occupancy, absorption and vacancy benchmarks by asset class
A garden-style apartment complex in Austin reports 95% occupancy. Sounds healthy. But dig into the rent roll and you find half the units are leased to residents on move-in concessions of six weeks free rent, and the effective rent collected is 12% below face rent. The building looks full. It is bleeding cash. This gap between what a leasing office reports and what the income statement shows is the first thing any real estate analyst has to learn to see.
This lesson covers the core occupancy metrics used across US multifamily and European logistics, how to calculate them, and the benchmark ranges you should recognize when you see them in a CBRE or JLL quarterly report.
Physical vacancy is the simplest metric: the percentage of rentable units or square feet sitting empty at a point in time.
Physical vacancy = Vacant units ÷ Total units
A 200-unit apartment building with 10 empty units has 5% physical vacancy, or 95% physical occupancy.
Economic vacancy (also called economic occupancy loss) measures lost rental income, not lost space. It captures concessions, bad debt, and units leased below market rent.
Economic vacancy = (Gross potential rent − Actual rent collected) ÷ Gross potential rent
Worked example:
Economic vacancy = ($500,000 − $440,000) ÷ $500,000 = 12%
So physical occupancy is 95%, but economic occupancy is only 88%. That 7-point gap is concessions and collection loss, and it is invisible if you only look at the leasing report. This is precisely how a "95% occupied" building loses money: the headline number measures space, not cash.
Sophisticated owners and lenders always ask for the economic figure. If a broker or sponsor only quotes physical occupancy, treat that as a flag to ask for the rent roll.
Net absorption measures the change in occupied space over a period, the real-time read on demand.
Net absorption = Occupied space (end of period) − Occupied space (start of period)
It nets out new leasing against move-outs and lease expirations. Positive net absorption means demand is outpacing space being vacated; negative net absorption (common in oversupplied markets) means more space emptied out than was leased.
Analysts pair net absorption with new supply (completions) to judge market direction:
US multifamily, as of late 2025 (estimates, CBRE and RealPage data): national multifamily vacancy has hovered around 6-7%, elevated relative to the pre-2022 norm of roughly 4-5%, largely because a multi-year wave of new supply (particularly in Sun Belt metros like Austin, Phoenix, and Nashville) outpaced absorption. Net absorption has actually been historically strong in absolute unit terms, but supply was stronger still, so vacancy still rose. This is the classic "both can be true" trap: strong demand and rising vacancy simultaneously.
European logistics, as of late 2025 (estimates, CBRE and JLL European reports): prime logistics vacancy across core Western European markets (UK, Germany, France, Netherlands) has generally sat in the 4-6% range, well below the 8-10%+ seen in many US industrial submarkets after the post-pandemic overbuild. European logistics supply has been more constrained by land scarcity and stricter planning regimes, keeping vacancy structurally tighter.
When lenders and appraisers underwrite a deal, they do not use current occupancy, they use stabilized occupancy, the long-run sustainable occupancy rate once a property or market normalizes.
Typical stabilized occupancy benchmarks (estimates, widely used industry rules of thumb):
If a pro forma assumes 97% occupancy for a suburban apartment complex when the submarket stabilizes at 93%, that is an aggressive assumption inflating projected net operating income (NOI). This is one of the first things to check in any deal memo.
Quarterly reports typically show four linked figures for a submarket:
1. Total inventory (stock)
2. Vacancy rate
3. Net absorption (quarterly and trailing 12 months)
4. Under construction / new completions
The relationship to watch: vacancy rate change ≈ (completions − net absorption) ÷ inventory. If completions consistently exceed absorption, vacancy rises quarter over quarter, and you should expect landlords to increase concessions to hold occupancy, which is exactly why economic vacancy diverges from physical vacancy in oversupplied markets.
CBRE, JLL, Cushman & Wakefield, and Colliers all publish free quarterly reports by market and asset class; these are a genuinely useful (and free) primary source. See CBRE's US real estate market outlook research for current figures by metro.
Vérification des acquis
1. A building reports 95% physical occupancy but only 88% economic occupancy. What does this gap most likely indicate?
2. Why can't an analyst rely solely on the physical occupancy figure from a leasing report to assess a property's financial health?
3. A property manager wants to know how much revenue is being lost to free-rent concessions and uncollected rent, not just how many units are empty. Which metric should they calculate?
4. Select ALL correct answers about the difference between physical vacancy and economic vacancy.
Sélectionnez toutes les réponses correctes.
5. Select ALL correct answers about components that would cause economic vacancy to be higher than physical vacancy for a given property.
Sélectionnez toutes les réponses correctes.
Economic vacancy feeds directly into NOI, and NOI is what gets capitalized into value.
NOI = GPR − Vacancy and credit loss − Operating expenses
Value = NOI ÷ Cap rate
If economic vacancy is 12% instead of the reported 5% physical vacancy, NOI is materially lower, and so is value, at any given cap rate (the capitalization rate, essentially the unlevered yield a buyer requires). A property marketed on physical occupancy alone can look 5-8% more valuable than its true economic performance supports. This is a common due diligence trap in multifamily acquisitions, and it is why buyers request T-12 (trailing twelve month) operating statements, not just current rent rolls.
For logistics assets, the equivalent trap is different: physical vacancy can look low (a warehouse is "leased") while the lease is a short-term or below-market renewal signed under duress, meaning contract rent lags market rent significantly. Analysts check this via the mark-to-market spread, the gap between in-place rents and current market rents, a live issue in European logistics given strong rental growth in prime distribution hubs like the Netherlands and Germany's Ruhr region in recent years.
🎬 [VIDEO: "Vacancy Rate vs Occupancy Rate Explained" - youtube.com - a short explainer distinguishing physical occupancy from economic occupancy with worked numeric examples, useful reinforcement of this lesson's core calculation]
| Asset class | Region | Typical stabilized vacancy | Notes |
|---|---|---|---|
| Multifamily | US | 4-7% | Elevated in Sun Belt oversupply metros |
| Logistics/industrial | Europe (core) | 4-6% | Constrained by planning/land scarcity |
| Logistics/industrial | US | 6-10% | Post-2022 supply wave elevated vacancy |
| Office | US/Europe gateway | 10-20%+ | Structurally impaired by hybrid work |
All figures are estimates and vary significantly by metro; always check the current quarter's CBRE/JLL data for the specific market you are analyzing.