Glossary

Economic Occupancy

The percentage of gross potential rent actually collected over a period, calculated as net rental income divided by gross potential rent, capturing the combined drag of vacancy, loss to lease, concessions, and bad debt in a single figure.

Economic occupancy is generally the more meaningful figure for underwriting and valuation than physical occupancy alone, since it directly reflects collected revenue rather than a headcount of occupied doors. A widening gap between physical and economic occupancy at a given property is a specific, diagnostic red flag: it isolates a rent-collection or pricing problem — concessions, loss to lease, or delinquency — from a leasing or demand problem, a distinction physical occupancy alone cannot make. Lenders and appraisers use trailing economic occupancy, rather than trailing physical occupancy or a generic stabilized-vacancy assumption, as one of their primary sanity checks against a sponsor's projected NOI, and a wide, unexplained gap between the two figures in an offering memorandum warrants specific diligence into the underlying rent roll and AR aging before relying on either metric.