Vacancy rate is the percentage of a property’s rentable units, or rentable square footage, that is unoccupied at a given time or over a period. It is the opposite of the occupancy rate: if a building is 93% occupied, its vacancy rate is 7%.
Vacancy rates are used for individual properties and for whole markets. A market vacancy rate tells you how much competition you face for tenants.
How to calculate it
Vacancy rate = Vacant units / Total units x 100
To measure vacancy over time, many owners use unit-days or lost rent instead:
Economic vacancy rate = Rent lost to vacancy / Gross potential rent x 100
When underwriting a property, investors also apply a vacancy allowance, an estimated percentage of rent that will be lost to vacancies and turnover, even if the building is full today.
Worked example
A hypothetical 24-unit building has 2 empty units.
- Vacancy rate today: 2 / 24 = 8.3%
Over the past year, units sat empty for a total of 30 unit-months out of a possible 288 (24 units x 12 months).
- Annual physical vacancy: 30 / 288 = about 10.4%
That number is higher than today’s snapshot. It shows that turnover is costing the owner a lot of income and that faster leasing should be a priority.
Why it matters for landlords
Vacancy directly reduces net operating income. Each empty month costs a full month’s rent, plus utilities, marketing and turnover costs. For a hypothetical $1,800 unit, a 30-day vacancy costs at least $1,800, which is often more than the difference between two asking rents.
Ways to lower vacancy include pricing at market rent, starting renewals early, turning units quickly and marketing well before move-out. TenantLoop’s Lease Renewal agent helps you start renewal conversations on time, and leasing tools publish listings on your own website and in a standard listing feed. Our guide on how to fill vacancies faster has more ideas.
Related terms
In practice. How the term shows up day to day.
How do I calculate vacancy over a year?
Count the unit-months that sat empty and divide by the total unit-months. A 24-unit building with 30 empty unit-months in a year had about 10.4% vacancy.
What is a vacancy allowance?
An estimated share of rent you expect to lose to vacancies and turnover. Investors include it when underwriting, even if the building is full today.
What lowers vacancy fastest?
Pricing at market rent, starting renewals early, turning units quickly and marketing well before a tenant moves out.