WHAT IS ABSORPTION?
Absorption is the amount of space or units occupied within a market over a given period of time, typically one year.
Absorption considers both construction of new space and removal of existing space and/or units. In general, absorption
represents the demand for a type of real estate contrasted with supply. When demand is less than supply, vacancy
increases and absorption is negative. Negative absorption can indicate changes in the larger economy, such as a decline
in employment due to the closing of a business.
Generally, absorption should be separated by type and/or class of property, and tabulated over a period of several years
to show trends in the local real estate market. These trends can support the forecasting of future absorption and real
estate needs for particular property types.
PURPOSE AND ROLE IN PLANNING
Absorption analysis is a useful initial step in the forecasting of future land use. In addition to an understanding of
demographic, household, and economic trends, an understanding of absorption trends is can be a key component in
a well-grounded approach to planning how much and what type of land a community should plan for in the future. By
calculating absorption, communities can inform everything from their own economic development strategy to capital
improvements planning.
HOW TO CALCULATE ABSORPTION
Calculating absorption is a relatively straightforward mathematical process. Quite simply, absorption is the difference
between the amount of occupied space in a particular market area at the beginning and end of a given time period. The
most common units of measurement for absorption are square feet and/or acres (especially for non-residential uses) and
number of units (generally, for residential uses). As noted above, the difference can be positive or negative, and should
account for both new construction/redevelopment as well as demolition/repurposing. To calculate absorption, take the
following steps:
STEP 1. Determine the total occupied space (Ob ) at the beginning of the period. To do this, subtract vacant space at the
beginning of the period (Vb ) from all usable space at the beginning of the period (Sb ).
Ob = Sb โ Vb
STEP 2. Determine the total occupied space (Oe ) at the end of the period. To do this, subtract vacant space at the end
of the period (Ve ) from all usable space at the end of the period (Se ).
Oe = Se โ Ve
STEP 3. Calculate the ABSORPTION. Subtract the total occupied space (Ob ) at the beginning of the period from the
total occupied space (Oe ) at the end of the period. The result is the Net Absorption (A).
A = Oe โ Ob
CALCULATING ABSORPTION LOCAL PLANNING
HANDBOOK
Continue to next page
