The formula for net absorption is defined as the total square feet leased during a period, minus the square feet in leases expired, terminated, or defaulted, minus the square feet of new construction, plus what?

The formula for net absorption effectively measures the change in occupied space within a real estate market during a specified time frame. It accounts for the activities involving leasing, vacancy, and physical changes to the properties.

The correct answer emphasizes the inclusion of any demolition or change of use. When a property is demolished or its use changes significantly, this directly impacts the availability and utilization of space in the market. Incorporating this variable into the net absorption calculation is essential because it helps provide a more accurate reflection of the current market conditions. For instance, if a large building is demolished, it could reduce the overall available square footage, thereby influencing net absorption negatively. Conversely, if a space shifts from one use to another, it might increase the active inventory available for tenants.

Recognizing changes in physical space, such as through demolition or an alteration in allowed use, is crucial for asset managers and investors, as it allows them to understand market dynamics better and make informed decisions regarding leasing strategies and property management.