An office market segment has 50,000 square feet available. Absorption has been stable at 120,000 square feet per year, and no new or returning supply is expected. At that pace, how long will it take to absorb the available space?
Correct Answer
C) 5.0 months
Monthly pace =120,000 SF/12=10,000 SF/month; duration=50,000 SF/(10,000 SF/month)=5 months. Use the same population, period and price/listing definition throughout. Common errors: dividing by the annual pace and reporting years as months gives 0.4 months; inverting the ratio (pace ÷ availability) gives 2.4 months; multiplying the monthly result by 12 gives 60.0 months.
Why This Is the Correct Answer
Option C is correct because the monthly pace is 120,000 SF / 12 = 10,000 SF per month, and 50,000 SF / 10,000 SF per month = 5.0 months. With no new or returning supply assumed, current availability would be absorbed in about five months at that pace.
Why the Other Options Are Wrong
Option A: 0.4 months
Option A is wrong because 0.4 months comes from dividing by the annual pace, 50,000 / 120,000 = about 0.42, which is a figure in years, and labeling it months. Converting the pace to 10,000 SF per month gives 50,000 / 10,000 = 5.0 months.
Option B: 2.4 months
Option B is wrong because 2.4 months comes from inverting the ratio: 120,000 / 50,000 = 2.4, which divides pace by availability. Duration is availability divided by monthly pace: 50,000 / 10,000 = 5.0 months.
Option D: 60.0 months
Option D is wrong because 60.0 months comes from multiplying the correct monthly result by 12: 5.0 x 12 = 60. The 5.0 figure is already in months, so no further conversion is needed.
Space over pace
Duration equals available space over absorption pace, with the pace stated per month to get months.
How to use: Use space over pace on any absorption-duration question and check that the units match.
Exam Tip
Convert annual absorption to monthly before dividing, then sanity-check: absorbing 10,000 SF a month, 50,000 SF should take about five months.
Common Mistakes to Avoid
- -Dividing by the annual pace and reporting years as months
- -Inverting the ratio of pace to availability
- -Multiplying an answer already in months by 12
Concept Deep Dive
Analysis
This question tests an inventory-duration calculation for office space: available space divided by the monthly absorption pace. The annual pace must first be converted to a monthly pace so the answer comes out in months.
Background Knowledge
Absorption rate is the rate at which available space is leased or sold in a specific market during a given period. Dividing available inventory by the absorption rate per period gives the time needed to absorb it, assuming the pace holds and no new supply arrives. The same population, period and space definition should be used throughout.
Real-World Application
An appraiser analyzing a suburban office segment finds 50,000 SF available and about 120,000 SF absorbed per year. At that pace the current availability would take about five months to absorb, a figure the appraiser weighs with new construction, returning space and vacancy trends before drawing lease-up conclusions.
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