What is Absorption?

Definition

Absorption is the net change in occupied commercial space over a defined time period, calculated as total space newly occupied minus total space vacated. Positive absorption means the market is consuming more space than it is releasing; negative absorption indicates rising vacancy. Absorption rates directly affect CAM reconciliation because changing occupancy levels impact gross-up calculations, pro-rata share denominators, and overall recovery ratios. In markets with negative absorption, landlords face increasing vacancy-related costs that may not be fully recoverable through gross-up provisions, particularly if gross-up thresholds are set below actual occupancy. Property controllers should monitor absorption trends in their markets to anticipate impacts on expense recovery and adjust CAM estimates accordingly.