What does the term "occupancy" refer to in REITs?

The term "occupancy" in the context of REITs refers to the percentage of rented versus total available units. This figure is crucial as it indicates how effectively the properties owned by the REIT are being utilized. A high occupancy rate suggests that most units are rented out, which usually translates to stable cash flow and higher returns for investors. Conversely, a low occupancy rate may indicate issues with property management or market demand, which can negatively impact the REIT's financial performance.

Understanding occupancy is essential for REITs as it affects their revenue streams. The stability and attractiveness of occupancy rates can influence investor confidence and the overall valuation of the REIT. Therefore, maintaining a high occupancy level is a primary operational goal for property management teams within REITs.