For practical purposes, gross absorption is defined as the total lease space signed during a particular period.
Gross absorption looks only at new leases signed, and will always be a positive value. For net changes in lease space signed, please see net absorption.
Gross absorption, however, fails to indicate the decision-relevant marginal shift in demand. To expand on above, it does not take into account space that is vacated during the time period, hence the term gross. For example, the total space vacated might exceed the total amount of space leased, indicating that space demand is decreasing. The gross absorption figure would not show this. For this reason, gross absorption is usually not used in CRE decision-making. One particularly useful application is if net absorption is known, and gross absorption can be calculated and subtracted from this, total space vacated during the period is revealed.
A stricter expansion on this definition (although hard to measure) is of total lease space signed and physically occupied. (The calculation here: leased space less shadow space for that lease). For example, where a lease is signed, but physical occupation of that space were only to happen outside of the stipulated time period, then such space would be excluded from the gross absorption calculation (for that period). In accordance with the stricter definition, when this space is physically occupied, then it will count to gross absorption.
Net absorption and net absorption rates are better measures of demand in a real estate market than gross absorption.
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