Definition
Vacancy rate directly impacts property income and valuation. Physical vacancy measures unoccupied units; economic vacancy includes units occupied but not generating full rent (free rent periods, delinquent tenants). Market vacancy rates help assess supply-demand dynamics: declining vacancy signals a tightening market with potential for rent increases; rising vacancy signals oversupply.
functions Formula
Vacancy Rate = Vacant Units / Total Units × 100%
lightbulb Example
A 100-unit apartment complex has 6 vacant units. Physical vacancy = 6%. If 2 occupied units are on free-rent concessions, economic vacancy = 8%. Market average is 5%, suggesting this property underperforms on leasing.
verified_user Key Points
- Directly reduces effective gross income
- Physical vs economic vacancy measures
- Market vacancy indicates supply-demand balance
- Below-market vacancy signals rent increase potential