What does net absorption in real estate measure?

Net absorption in real estate measures the total square footage leased minus the square footage that became vacant over a specific period, usually a quarter or a year. This metric is crucial for understanding the demand and supply dynamics in the real estate market. When net absorption is positive, it indicates that more space is being occupied than vacated, suggesting a healthy demand for real estate. Conversely, negative net absorption suggests that more space is becoming vacant than being leased, which can be a signal of market softness.

This concept helps landlords, investors, and analysts gauge the overall health of the real estate market and can influence decisions regarding development, investment, and property management strategies. It provides insight into trends and can help predict future rental rates and property values based on current demand levels.

Other options address different aspects of the real estate market but do not define net absorption accurately: rental price increases pertain to market conditions rather than direct occupancy metrics, overall market value relates to property appraisal rather than occupancy rates, and sales data focuses on transactions rather than leasing activities.