Economic occupancy represents the percentage of potential rental income a property achieves compared to its maximum potential. It considers not only physical occupancy but also the actual rent collected. For example, a property with 90% physical occupancy but offering discounted rents might have a lower economic occupancy than a property with 85% physical occupancy charging full market rates. The calculation typically involves dividing the actual gross potential income (GPI) collected by the potential gross income if all units were rented at market rates. This provides a clearer picture of a property’s financial performance than physical occupancy alone.
Understanding a property’s revenue-generating capacity is essential for effective asset management. Analyzing this metric allows for informed decisions regarding rent adjustments, marketing strategies, and operational expenses. Historically, reliance solely on physical occupancy rates often obscured the full financial picture, potentially misleading investors and property managers. This metric provides a more accurate representation of a property’s profitability and its position within the market.