Occupancy rate is the complement of vacancy rate. A 5% vacancy rate = 95% occupancy. Landlords and property managers typically track occupancy to measure operational performance.
Occupancy Rate = 1 − Vacancy Rate
Economic occupancy vs. physical occupancy:
- Physical occupancy: % of units with a tenant present
- Economic occupancy: % of potential rent actually collected (accounts for concessions, non-payment, partial months)
Economic occupancy is the more accurate metric for underwriting — a unit can be physically occupied but economically vacant if rent isn't being paid.