Occupancy Cost Ratio
Occupancy cost ratios are calculated by dividing a tenant's total occupancy costs by the tenant's total sales, producing a sales-normalized affordability measure. Industry commentary notes that ratios vary by property type and retail category and are used to judge rent sustainability relative to tenant economics.
- Where it applies
- Generally, not specific to New York
- When it comes up
- Leasing; rent reset negotiations; asset management
- Property types
- Retail
In practice
Because the denominator is tenant sales, data access (sales reporting clauses) and audit rights materially affect the reliability of the ratio.
Related terms
Operating Performance Metrics
- Average Daily Rate (ADR)
- EBITDA Per Available Room (EBITDA PAR)
- Gross Operating Profit Per Available Room (GOPPAR)
- Labor Cost Per Available Room (LPAR)
- Load Factor (Common Area Factor / Loss Factor)
- Net Effective Rent (NER)
- Occupancy Cost
- Rentable Area
- Revenue Per Available Room (RevPAR)
- Sales per Square Foot
General information, not legal, tax or financial advice.