Vacancy Rate
Vacancy rate measures the percentage of unoccupied rental units. Learn why landlords track vacancy rates and how they influence rents.
Definition
The vacancy rate is the percentage of available rental units in a property or market that are unoccupied over a given period. It’s calculated by dividing the number of vacant units by the total units and multiplying by 100. Landlords and investors monitor vacancy rates to gauge supply and demand, set rents, and assess investment performance. High vacancy rates indicate oversupply or weak demand and may prompt rent concessions, while low vacancy rates signal strong demand and may justify rent increases. Vacancy trends also influence property values and new construction decisions.
Why It Matters
An empty unit does not just cost rent, it costs the return the whole purchase was underwritten on. Vacancy is the gap between the gross rent on a listing and the money that reaches your account, and lenders discount projected rent on investment loans for exactly that reason. The local rate also tells you which conversation you are in: raising renewal rents, or offering a free half month to fill a unit.
Examples
One side of a duplex grossing $3,600 a month sits empty for seven weeks, costing about $2,900 and pulling a projected 6.1 percent net yield down to 5.4 percent.
A 200 unit building reports 14 units empty, a 7 percent vacancy rate, and responds by cutting asking rents $75 and offering one month free.
An owner in a submarket running 3 percent vacancy raises a renewal $120 a month and the tenant signs without shopping the market.
Tips
Model 5 to 8 percent vacancy in your cash flow even when the unit is occupied today, and more in student, military or seasonal areas where turnover clusters.
Begin marketing 45 to 60 days before a lease ends rather than after move out, because overlapping showings with the current tenancy is what keeps turnover down to days.
Benchmark against same bedroom count units within about a mile: citywide vacancy blends downtown high rises with single family rentals and tells you nothing useful about your pricing.
Related Terms
Absorption Rate
Absorption rate measures housing supply versus demand. Learn how it’s calculated and what it reveals...
Seller’s Market
A seller’s market occurs when demand exceeds supply. Understand how low inventory and high demand dr...
Year-over-Year (YoY) Appreciation
Year-over-year appreciation compares property value changes over 12 months. Understand how YoY metri...
Ready to Use Your Real Estate Knowledge?
Now that you understand Vacancy Rate, let Wayber help you navigate your real estate journey. Our flat-fee service saves you thousands while providing expert guidance.