Glossary term
Economic Occupancy
Economic occupancy is the rent actually collected divided by gross potential rent. It shows how much of a property's income potential is being realized.
The formula is rent collected / gross potential rent. It looks at dollars instead of doors. A building that is 95 percent physically occupied may have a lower economic occupancy because of concessions, loss to lease, down units and unpaid rent.
The gap between physical and economic occupancy points to where income is leaking. A big gap often comes from delinquency, discounts or units leased below market.
Because it ties directly to income, economic occupancy is a better guide to NOI than physical occupancy alone.
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