Vacancy Rate Calculator
Measure physical and economic vacancy separately — they are rarely the same number — and see what a few points of vacancy do to NOI and to value.
Vacancy Rate Calculator
Results recalculate instantly on every keystroke. Nothing you type is transmitted.
What this result does not account for
- Uses a uniform rent across units when relating physical to economic vacancy.
- A single-period snapshot; seasonal letting patterns are not modelled.
- The value impact assumes the cap rate is unchanged, whereas a chronically vacant asset would usually be repriced at a higher one.
In short: Physical vacancy counts empty units; economic vacancy measures lost rent as a share of potential gross income. A building can be 90% physically occupied and lose far more than 10% of its income once concessions and non-payment are counted.
Formula
physical vacancy = vacant units ÷ total units
economic vacancy = rent lost ÷ potential gross income
[('physical vacancy', 'the share of doors standing empty'), ('economic vacancy', 'the share of potential income not collected'), ('potential gross income', 'every unit let for every month'), ('rent lost', 'vacancy plus concessions plus bad debt')]
Worked Example
- Count vacant units against total units for the physical rate.
- Total the income actually lost — empty units, concessions and arrears alike.
- Divide that by potential gross income for the economic rate.
- Compare the two: a gap means the lost income is not explained by the door count alone.
- Capitalise the lost income at the market cap rate to see the value at stake.
One unit of ten empty is 10% physical vacancy, but if the rent actually lost is 7,200 against 144,000 of potential income the economic vacancy is only 5%. Three turnovers a year at 21 days each accounts for 1.726% on its own. Taking vacancy from 5% to 10% cuts NOI from 84,240 to 77,040 and, at an 8.02% cap rate, removes about 89,800 of value — from five points of occupancy.
Strengths & Limits Of This Model
Where this engine is strong
- Separates physical from economic vacancy and explains the gap
- Isolates turnover-driven vacancy as its own figure
- Capitalises the income loss into a value figure
Where it stops
- Uniform rent assumption
- Single period, no seasonality
Practical Use Cases
Underwriting a purchase
Setting a defensible vacancy assumption rather than accepting the seller's.
Diagnosing lost income
Separating empty units from concessions and arrears.
Justifying a leasing spend
Showing what shorter turn times are worth in NOI and in value.
Reporting to investors
Quoting economic occupancy, which is the figure that matches the income statement.
Stress-testing a loan
Finding the vacancy level at which coverage fails.
Methodology & Editorial Standards
Physical vacancy is vacant units over total units; economic vacancy is income lost over potential gross income. The two are computed independently and compared, because a difference between them is diagnostic rather than an error. Turnover vacancy is turnovers multiplied by days vacant over unit-days in a year. The value impact capitalises the income difference between the entered vacancy and full collection at the cap rate supplied.
Computation runs in IEEE-754 double precision at full internal precision; rounding to two decimal places occurs strictly at the display layer, so no cumulative drift enters the result. All monetary outputs use accounting presentation — grouped thousands, two decimals, negatives in parentheses — so figures can be transcribed directly into a model or working paper. Division-by-zero and out-of-domain inputs return an em-dash rather than a misleading number.
This engine was reconciled against an independent reference implementation and hand-verified for the worked example above before release. Our full five-stage review process is published on the About Us page.
Disclaimer. This calculator is provided for informational and modelling purposes only and does not constitute financial, tax, legal, medical, or engineering advice. Verify all figures with a qualified professional before acting on them.
Vacancy Rate Calculator — 10 Expert FAQs
10 analyst-written answers to the questions practitioners actually ask — optimised for voice and answer-engine retrieval.
What is the difference between physical and economic vacancy?
Physical vacancy counts empty units as a share of total units. Economic vacancy measures income actually lost as a share of potential gross income, so it also captures concessions, free rent periods and non-payment. Economic vacancy is almost always the higher and more useful figure, and it is the one that reaches the income statement.
What vacancy rate should I underwrite?
Five to seven per cent economic vacancy is the usual range for stabilised multifamily, adjusted for the submarket. Anything below about three per cent should be treated as an assumption rather than a fact: turnover alone consumes more than that in most buildings.
Why is my economic vacancy higher than my physical vacancy?
Usually concessions or arrears. A month of free rent on a twelve-month lease is more than eight per cent of that unit's income even though the unit is occupied throughout. Tenants who do not pay are similarly invisible in a door count.
How much does vacancy cost in value terms?
Far more than the rent itself, because lost income is capitalised. At an eight per cent cap rate every dollar of permanent annual income lost removes about twelve and a half dollars of value. Five points of vacancy on a mid-sized building can easily be a six-figure valuation swing.
Does vacancy reduce operating expenses?
Barely. Property taxes, insurance, debt service and most management costs continue whether a unit is let or not. Only unit-level utilities and some turnover costs vary, which is why vacancy falls almost entirely through to NOI rather than being cushioned by lower costs.
How do I reduce turnover vacancy?
Shorten the turn and renew more tenants. Pre-leasing before notice expires, having trades scheduled in advance, and treating renewal as a process rather than an afterthought all cut days vacant. It is the cheapest NOI improvement available because it needs process rather than capital.
Is market vacancy the same as my vacancy?
No, and the two are frequently confused. Published submarket vacancy is physical and is a snapshot of a whole market, including product that competes with yours only loosely. Use it for context, not as your underwriting assumption.
Should I underwrite the current vacancy?
Only if it is representative. A building at zero vacancy on purchase day will not stay there, and one with a temporary spike may recover. Underwrite a stabilised rate you can defend through a cycle, then test the deal at a level worse than that.
What is credit loss and is it vacancy?
Credit loss is rent billed but never collected. Strictly it is distinct from vacancy, but both reduce collected income and both belong in the economic vacancy figure. Lenders usually treat them together as vacancy and credit loss for exactly that reason.
How does vacancy affect my loan?
Directly, through coverage. Vacancy reduces NOI, and DSCR is NOI over debt service, so a vacancy spike can push a compliant loan into breach. Work out the breakeven occupancy for your property and treat the distance between it and your current occupancy as the real safety margin.