Which measure reflects the balance of supply and demand for a property type at current rents?

• A. Cap rate
• B. Rent per unit
• C. Vacancy rate
• D. Occupancy rate

Answer: (D)

Occupancy rate measures the portion of units that are currently leased relative to the total available units. It directly shows how much space is being used at the rents being asked today. When occupancy is high, it means demand at current rents is strong and space is being absorbed, signaling a balanced or favorable market for that property type. When occupancy is low, demand at those rents isn’t keeping up with supply, indicating an oversupply or price resistance.

This measure ties leasing activity to the price level in place now, which is exactly what reflects the balance of supply and demand. Cap rate looks at value and return, not how much space is actually being rented at current rents. Rent per unit is just the price level and doesn’t capture whether that price is being absorbed. Vacancy rate indicates unoccupied space, but occupancy rate is the active counterpart that shows how much of the space is in use, giving the clearest read on market balance at current rents.