Net lease glossary
Occupancy Cost Ratio
A tenant's total occupancy costs, including rent, taxes, insurance, and CAM, divided by its gross sales at that location.
The occupancy cost ratio expresses total occupancy expense as a share of store sales. A restaurant doing $2 million in sales with $160,000 of total occupancy cost has an 8% ratio. Healthy ranges vary by concept and margin structure. A low ratio suggests the rent is sustainable and the tenant has reason to renew, while a high ratio signals the location may be at risk of closure or a rent concession request.