Occupancy reporting that doesn't lie: definitions that change the story

"Occupancy is 94%."

That line can mean five different things-and in real estate finance, each meaning tells a different story about performance, risk, and what happens next.

When occupancy reporting is inconsistent (across assets, managers, or SPVs), it creates two problems at once:

1. Operational teams talk past finance teams (because they're measuring different realities).
2. Investors lose confidence (because the same portfolio can "improve" on paper while cash doesn't follow).

The fix isn't a better chart. It's better definitions-and the discipline to keep them consistent month after month.

This blog is a practical guide to occupancy reporting that stays honest: what to measure, how to define it, and how to reconcile it to the financials so it doesn't drift into "dashboard theatre."

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Why occupancy "lies" (even when nobody is trying to mislead)

Occupancy gets distorted for predictable reasons:

1) People mix up physical and economic reality

• Physical occupancy answers: "Is the space taken?"
• Economic occupancy answers: "Is it earning what it should?"

A building can be 95% physically occupied and still be economically weak due to rent-free periods, concessions, arrears, or below-market renewals.

2) The denominator quietly changes

Two teams can both report "90% occupancy" while measuring different totals:

• Total units vs available units
• Net lettable area (NLA) vs gross lettable area (GLA)
• "Online" units vs units held for refurbishment

If your denominator changes month to month without being explicit, the trend is not trustworthy.

3) Timing differences create false narratives

Month-end snapshot occupancy can look great while average occupancy (what drives rent earned over the month) tells a different story-especially with move-ins, move-outs, and lease start dates around month-end.

4) Data comes from multiple systems

Occupancy often lives in property management systems, leasing trackers, and spreadsheets-while finance lives in accounting. Without a consistent model, the portfolio view becomes a manual reconciliation exercise.

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The minimum viable "truth set": 3 occupancy metrics you should standardise

You don't need 12 occupancy metrics. You need three, clearly defined, and consistently applied across every asset/SPV.

Metric 1: Physical occupancy

What it answers: "How much space is actually occupied right now?"

Definition (choose one basis and stick to it):

• Unit basis: occupied units - total rentable units
• Area basis: occupied area (NLA/GLA) - total lettable area

Key choices you must document:

• Do you include units/space offline for refurb?
• Do you treat "owner use," show units, or staff units as occupied?
• Do you count partially occupied space?

Best practice: Report physical occupancy as a point-in-time metric (e.g., "as at 31 Oct"), and if you want month performance, add an average physical occupancy version too.

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Metric 2: Leased occupancy

What it answers: "How much space is leased, even if not yet occupied or not yet paying full rent?"

This is your forward-looking metric and helps explain what's coming next.

Common definition:

• leased units/area - total lettable units/area

Key choices you must document:

• Do you include leases signed but not commenced? (Often yes-but label it clearly.)
• Do you include units in rent-free / fit-out periods? (Often yes-because it's contractually leased.)
• Do you include "under offer" or "heads of terms"? (Usually no, but track separately as pipeline.)

Best practice: Publish leased occupancy alongside physical occupancy so readers can see whether vacancies are real risk or just timing.

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Metric 3: Economic occupancy

What it answers: "What % of gross potential rent are we actually earning?"

This is the metric that stops occupancy reporting from becoming a feel-good number.

A robust economic occupancy definition:

• Net rent earned (after rent-free/concessions) - Gross potential rent (at full occupancy)

Depending on asset class and reporting conventions, you might define the numerator as:

• Rent earned (accrual basis), or
• Rent billed (invoices), or
• Rent collected (cash)

Best practice: Use earned or billed for performance reporting, and add collections rate as a separate credit/control metric.

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The definitions that change the story (and the investor conversation)

Here are the "gotchas" that most often flip the narrative:

A) Total vs available (offline/held units)

If 10 units are offline for refurb:

• Total basis: 90 occupied - 100 total = 90%
• Available basis: 90 occupied - 90 available = 100%

Both are "true," but they tell different stories:

• Total basis reflects capacity utilisation and long-run earnings power.
• Available basis reflects leasing effectiveness on what's currently market-ready.

Recommendation: report both if offline units are material:

• Physical Occupancy (Total)
• Physical Occupancy (Available) ...and explicitly show "offline units/area" as a separate line item.

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B) Point-in-time vs average occupancy

If you had vacancies for most of the month but filled them on the last day, month-end occupancy will look fantastic-while rent earned won't.

Recommendation:

• Use month-end occupancy for operational status
• Use average (day-weighted) occupancy for performance comparisons and revenue expectation

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C) Rent-free and incentives

A lease can be "occupied" and "leased" but economically weak in the short term.

Recommendation: Keep physical/leased occupancy clean and transparent, and let economic occupancy tell the truth about what the occupancy is worth right now.

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D) Arrears and non-payment

A unit can be occupied and billed... but not paying.

Recommendation: Don't distort economic occupancy to solve credit risk. Instead, track:

• Collections rate (cash received - cash due)
• Arrears balance and aging
• Bad debt/impairment policy (finance-controlled)

This keeps your occupancy metric honest and your credit controls visible.

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The "tie-out" that prevents dashboard fiction: reconcile occupancy to rent

If you want occupancy reporting that doesn't lie, you need one discipline:

Every month, occupancy should reconcile to rental income expectations.

A practical minimum viable tie-out looks like this:

1. Start with Gross Potential Rent (GPR) at full occupancy

2. Adjust for vacancy (based on average occupancy)

3. Adjust for rent-free / concessions / incentives

4. Adjust for contracted rent changes (indexation, renewals, re-lets)

5. Result = Expected rent billed/earned

6. Compare expected vs actual billed/earned (from accounting)

7. Investigate material variances:

   • timing cutoffs
   • missing lease updates
   • wrong unit status
   • rent changes not reflected
   • one-off credits/debits

You don't need perfection on day one. You need a repeatable process that flags when the "occupancy story" and "rent story" diverge.

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Portfolio reality: occupancy needs to be standardised across SPVs

Occupancy usually breaks at the portfolio level because every SPV/asset reports it slightly differently:

• different denominators (units vs area),
• different treatment of offline stock,
• different timing/cutoffs,
• and different definitions of "leased."

That's why the most useful portfolio setups bring occupancy into the same layer as finance:

• multi-entity SPV consolidation,
• standardised charting/mappings for financial comparability,
• and a consistent portfolio model that supports investor reporting and scenario planning.

When occupancy is standardised the same way your financial reporting is standardised, you stop debating definitions and start acting on insights.

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A practical "definition pack" you can publish internally

Here's a simple set of definitions you can put in your close pack or investor appendix (and enforce across all SPVs):

Reporting basis

• Units / NLA / GLA (choose one per asset class; don't mix within a portfolio view)

Point-in-time metrics (as at month-end)

• Physical occupancy (Total)
• Physical occupancy (Available)
• Leased occupancy (Committed)

Performance metrics (for the month)

• Average physical occupancy (day-weighted)
• Economic occupancy (earned or billed basis)
• Collections rate (cash basis)

Required supporting disclosures

• Offline units/area and reason (refurb, legal, holdback)
• Rent-free/concession exposure (count and value)
• Arrears snapshot (balance + aging)

This pack is what makes occupancy reporting defensible when questions come.

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How to implement this without creating a data nightmare

Step 1: Pick your definitions and lock them

Write them down, circulate them, and don't let each property manager improvise.

Step 2: Build a simple occupancy data model

Even in a spreadsheet to start:

• asset
• unit/area total
• offline
• occupied
• leased
• rent-free flag
• rent amount
• lease start/end

Step 3: Add month-end controls

• cutoff date/time
• exception thresholds (e.g., occupancy change >2% or offline change >X units)
• mandatory commentary for large moves

Step 4: Tie occupancy to rent every month

Make the tie-out non-optional. It's the guardrail that keeps reporting honest.

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The payoff: better decisions, better investor trust, fewer surprises

When occupancy is reported with consistent definitions and reconciled to rent, you unlock:

• cleaner NOI explanations,
• clearer leasing priorities (vacancy vs rent-free vs arrears),
• more credible portfolio forecasting,
• and investor reporting that doesn't unravel under scrutiny.

Occupancy should be a decision tool-not a marketing metric.