Operating Expense Floor Percent

A percentage of an operating expense that is actually incurred will mirror the property's physical occupancy percentage until it reaches the operating expense's Floor %. This should be set to 100% for expenses that do not vary with occupancy at all, like real estate taxes, so that even if occupancy falls below 100% - that expense will still remain the same.

For an expense that does vary with occupancy, such as utilities, the operating expense's Floor % would be set to something less than 100% that would correspond with how much of the expense would be incurred if the building's occupancy were to fall below that Floor %. For example, if the utilities operating expense were inputted at $100 with a Floor % of 50%, and the property's occupancy were 75% in Year 1, the utilities expense incurred would be $75. If in Year 2 the occupancy fell to 50%, the utilities expense would then fall to $50. If in Year 3 the occupancy fell to 25% - the utilities expense would remain at $50 as a result of the Floor % constraint, the idea being that even a totally vacant building still incurs some utility expense.

On CashFlow, an operating expense's Floor % can be inputted on the Operating Expenses tab within each individual expense.