Occupancy rate is the percentage of a property’s rentable units, or rentable square footage, that is occupied at a given time. It is the mirror image of the vacancy rate: together the two add up to 100%.
Owners, lenders and buyers watch occupancy closely because it is one of the clearest signs of how well a property is leasing and how stable its income is.
How to calculate it
Physical occupancy rate = Occupied units / Total units x 100
For commercial property, use square feet instead of units.
Many operators also track economic occupancy, which measures how much of the potential rent is actually collected:
Economic occupancy = Actual rent collected / Gross potential rent x 100
Economic occupancy is lower than physical occupancy when there are concessions, delinquent tenants, model or employee units, or units occupied but not paying.
Worked example
A hypothetical 50-unit apartment community has 47 occupied units.
- Physical occupancy: 47 / 50 = 94%
Gross potential rent is $90,000 a month. Because of two delinquent tenants and one free-month concession, the property collects $82,800.
- Economic occupancy: $82,800 / $90,000 = 92%
The 2-point gap tells the owner that collections and concessions, not just vacancies, are costing money.
Why it matters for landlords
Occupancy drives net operating income, and lenders often set minimum occupancy levels for financing. A very high occupancy rate is not always good news, though. If you are always at 100%, your rents may be below market rent. A falling rate can signal pricing, condition or service problems worth fixing.
Track occupancy over time, not just today. TenantLoop reports help you follow occupancy and your rent roll by property, and our tenant retention article covers ways to keep good residents longer.
Related terms
Where it gets confusing.
What is the difference between physical and economic occupancy?
Physical occupancy counts occupied units. Economic occupancy measures how much of the potential rent you actually collected, so concessions and unpaid rent lower it.
Is 100% occupancy a good sign?
Not always. A building that is always full may be renting below market. Watch the trend over time, not just today's number.
How do occupancy and vacancy rate relate?
They add up to 100%. A building that is 94% occupied has a 6% vacancy rate.