Vacancy rate is the percentage of all available units or space in a rental property that are vacant compared to the total supply of units or space at a particular time.
For example if an apartment complex consists of 320 units, of which 18 are currently vacant, it would have a current physical vacancy rate of 5.63% (18 vacant units divided by 320 total units). Alternatively, vacancy rates can be expressed as economic vacancy, which may be more meaningful when different units or spaces command significantly different rents. For example, assume a retail property has 3 equal sized units of 10,000 square feet each, but 2 of the units command $10.00 per square foot and one commands a rental rate of $15.00 per square foot due superior visibility and parking. If one of the $10.00 per square spaces is vacant, the property would have a 33.33% physical vacancy rate (10,000 vacant square feet divided by 30,000 total square feet) compared to 28.57% economic vacancy ($10.00 per square foot rent of the vacant space divided by $35.00 per square foot total potential rent).
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Hypothetical example(s) are for illustrative purposes only and are not intended to represent the past or future performance of any specific investment.
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