Occupancy Rate - Definition, What is Occupancy Rate, Advantages of Occupancy Rate, and Latest News - ClearTax (2024)

Introduction

The occupancy rate is the ratio of used or rented space to the total amount of available space. The analysts use occupancy rates when discussing housing, hospitals, hotels, bed-and-breakfasts, and rental units, among other categories. In a call centre, the occupancy rate refers to the time agents spend on calls compared to their total working hours.

Understanding Occupancy Rate

To demonstrate an occupancy rate, if there are 20 units in an apartment complex, 18 of which have tenants, the occupancy rate is 90%. Likewise, the occupancy rate of a 200-room hotel with guests in 150 rooms is 75%. On the other hand, the vacancy rate is the number of units in a building that are not leased relative to the total number of units in the building.

The occupancy rate of beds in hospitals and nursing homes can be useful for analysing patterns in the growth of the hospital. Those facilities manage their occupancy rates to avoid overcrowding. To better determine growth and demand, they also monitor occupancy levels for different departments. Additionally, governments and organisations use composite numbers at hospital occupancy rates to prepare public health programs.

Occupancy Rates in Real Estate

Occupancy rates are essential to investors in real estate as they act as an indicator of the anticipated cash flow. The commercial real estate investor looking to buy a shopping centre probably isn't interested in one that only has a 25% occupancy rate, meaning tenants reserved just 25% of the retail and restaurant space available in the mall.

An owner who buys a property with a fairly low occupancy rate will spend time and money seeking additional tenants, and he or she risks not filling the spaces while still paying maintenance costs and property taxes on them.

The apartment complexes, malls, and other low occupancy facilities often sell at a rate lesser than similar properties with high occupancy rates. A low occupancy rate in some cases indicates that something is wrong with the shopping centre, such as its location or the amenities available. For other situations, low occupancy rates may mean that the facility is poorly managed by its current owners or is located in an undesirable location.