Net Absorption Points to Strong Commercial Real Estate in Branson

Commercial real estate in Branson, Missouri continues to show impressive resilience in the face of recent headwinds.

Occupancy remains strong compared with other cities, thanks in part to a smaller impact from the work-at-home trend. Even the office category saw a slightly positive net absorption in 2023, even with limited inventory. 

That’s a stark contrast with the national picture, in which the net absorption rate has turned negative for office space in recent months. With more people working at home and interest rates remaining elevated, office leasing has decreased in a number of markets. 

Net absorption is a key decision factor for investors, developers, brokers and prospective tenants. It offers a snapshot of market dynamics such as leasing demand, opportunities and risks. While positive net absorption means demand is strong and growing, a negative reading indicates a contracting marketplace. Besides general economic conditions, changing supply and lease renewal rates can affect net absorption. 

Here’s an overview of what net absorption means and how it influences CRE investment decisions.

Jump to: 

• What does net absorption mean?
• How is net absorption calculated?
• Overall CRE trends
• Branson CRE outlook
• Your resource for CRE in Branson, MO

What Does Net Absorption Mean?

Net absorption measures the change in leased space during a specific time period. 

It tells us the supply and demand dynamics in commercial real estate. It can be calculated for different geographic regions, such as the city of Branson, the state of Missouri or the United States as a whole. It’s also helpful to look at net absorption for individual CRE sectors such as retail or office space. 

While gross absorption tells you the total amount of space occupied within the market, net absorption subtracts the amount of unoccupied space. This gives decision-makers a more accurate read of market conditions. 

• Positive net absorption means more space was leased or sold than was vacated or supplied for a given time period. It indicates healthy demand and a shrinking supply of available square footage. It also suggests that rents are likely to increase. 
• When net absorption turns negative, it’s a sign of weakening economic conditions. It means there is more space available than tenants or buyers are demanding. Rental costs are more likely to decrease when net absorption declines. 

How Is Net Absorption Calculated?

To determine net absorption, you need to know two things: 

• The total amount of commercial space that was rented or sold within a time period of interest, such as a month or a year. 
• The amount of space that became vacant during the same time frame. Vacancies can occur due to prior tenants leaving a particular space, or because of new construction. 

For example, suppose you have an office building that experienced the following changes over the course of a year. Tenants A and B both decided to move from a smaller space to a larger one as their businesses grew.

To calculate net absorption, you would first determine the total new space rented:

• [2000 square feet rented by Tenant A] + [2500 square feet rented by Tenant B] = 4500

Next, you would add up the space vacated:

• [1000 square feet vacated by Tenant A] + [1500 square feet vacated by Tenant B] = 2500

Finally, you would subtract the space vacated from the space that was leased:

• Net absorption = [4500 square feet rented] – [2500 square feet vacated] = 2000 square feet 

Overall CRE Trends

Current economic trends suggest strong rent growth in the industrial space, with ongoing weakness in the office sector. Net absorption for office space has turned negative in recent months, with more vacancies expected in the near term in various commercial buildings. 

Lawrence Yun, Chief Economist for the National Association of REALTORS, points to high interest rates as the leading factor hampering market conditions. Elevated rates put pressure on borrowing activity and raise the cost of refinancing. With buyers skittish about taking on new loans, the price of some commercial properties has fallen. 

Although Yun expects CRE to recover overall, he expects ongoing challenges for the office sector. 

Branson CRE Outlook

While not completely insulated from national trends, the Branson marketplace, known for its diverse commercial real estate listings, enjoys a number of advantages compared to other locations. 

Strong demand, high building costs and a tight labor market have kept all office categories at or near capacity. Class A buildings, for example, enjoyed a 95% occupancy rate for 2023. Class B and Class C clocked in at 92% and 99%, respectively, showcasing the resilience of commercial buildings in the area. 

Looking at all CRE categories, the Branson market was positioned for another strong performance in 2023 with its robust commercial real estate listings. Factors driving growth include strong retail sales and low vacancy rates. The citywide occupancy rate stood at 95% in 2024 with net absorption of 43,656 square feet.

Your Resource for CRE in Branson, MO

At Commercial One Brokers, our expertise is your greatest asset when it comes to commercial real estate in Branson. 

Thanks to decades of experience, we have an in-depth knowledge of the Branson area that no other CRE firm can match. Our comprehensive database contains decades of historical data on commercial buildings and listings. We have helped clients across a range of industries purchase, lease or invest in property in the lucrative Branson-Tri Lakes community.

Whether you’re looking to purchase, lease or invest in commercial real estate, reach out to our experts to discover the best CRE opportunities in the Branson area. Give us a call at 417-334-3149 or contact us online to explore our extensive commercial real estate listings and find your ideal property.