What is the Absorption Rate in Real Estate?

In the real estate world, the absorption rate is an effective barometer of the current market. It lets smart investors and developers know whether the market is about to go up or go down.

Specifically, the absorption rate refers to how long it takes for developers, investors and property owners to lease or market a newly developed, built or produced property. Such new spaces add to the supply; the absorption rate refers to how strong the demand is for that new supply of real estate.

Many investors look to the absorption rate trendline to get an idea of where the market is headed. When the absorption rate is trending downwards, that usually means that the supply is decreasing and the price is increasing. When the absorption rate is trending higher, that usually means that the local market has too much supply, which can have a downward effect on prices.

For more information, see also the following entries:

• :Commercial Real Estate:
• eveloper:
• :Lease:
• :Real Estate:
• :Tenant: