High absorption = healthy demand. Watch when underwriting new construction — you need to lease into a market that can absorb the units.
Market & Valuation
Absorption
The rate at which available inventory (units or SF) is leased or sold in a market.
More in Market & Valuation
- NOI (Net Operating Income)— Gross income minus operating expenses — excludes debt service, capex, and income taxes.
- Operating Expenses (OpEx)— Recurring costs of running a property — taxes, insurance, management, maintenance, utiliti…
- CapEx (Capital Expenditures)— Large periodic replacements — roofs, HVAC, water heaters, appliances — budgeted separately…
- Vacancy Rate— The percentage of time a rental is expected to sit empty between tenants.
- Cap Rate (Capitalization Rate)— NOI ÷ Purchase Price — the unleveraged annual yield of a commercial property.
- Cash-on-Cash Return— Annual pre-tax cash flow divided by the total cash you invested to acquire the deal.