What is a Vacancy Rate?


Vacancy rate is the ratio of rental units not rented versus the total number in the building, city, state, etc.


How Does a Vacancy Rate Work?


The formula for vacancy rate is:


Vacancy rate = Units not rented out / Total units


For example, let's assume that Company XYZ owns an apartment building that has 300 units. Of those units, 25 are not rented out. Using this information and the formula above, we can calculate that Company XYZ's vacancy rate is:


Vacancy rate = 25/300 = 8.33%


Though our example uses units as the basis for calculating vacancy rate, it is possible to use square feet or rent dollars instead.


Why Does a Vacancy Rate Matter?


The vacancy rate is equal to 1 - Occupancy rate. In our example, the occupancy rate would equal 1 - 0.0833 = 91.67%.

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