Occupancy cost refers to the expenses associated with occupying a property, such as rent, utilities, and maintenance. For commercial properties, occupancy cost is a major factor in determining the overall cost of doing business, as it can have a significant impact on a company's bottom line. For residential properties, occupancy cost is an important consideration for renters and homeowners as it can affect their overall cost of living.
For commercial properties, occupancy cost is usually expressed as a percentage of gross income and can include things like property taxes, insurance, and common area maintenance. It is used to determine the overall expense of operating a commercial property and to compare the costs of different properties.
For residential properties, occupancy cost includes things like rent or mortgage payments, insurance, property taxes, and utilities. It is used to determine the overall cost of living in a particular property or area and to compare the costs of different properties.
It's important to note that occupancy cost is not the same as purchase price or property value. While purchase price and property value are important factors to consider, occupancy cost is an ongoing expense that must be factored into the overall cost of owning or renting a property.