Occupancy cost is the combined cost of occupying and operating from a retail premises, using a clearly defined set of expenses.
How it works in retail
It commonly includes rent and specified property-related charges. Some analyses include utilities or other expenses, so reports should state the basis.
A retail example
A store records $60,000 in annual defined occupancy costs and $600,000 in net sales. Its occupancy-cost ratio on that basis is 10%.
What to keep in mind
There is no universal suitable ratio for every format or location. Compare consistent cost definitions and consider margins, store maturity and the role of the site.
Examples are illustrative. Terminology and measurement conventions can vary by business and market.