Vacancy Rate

Vacancy rates measure how much rentable space is unused. They can be calculated for a single building, a property portfolio or an entire market, such as offices in a city.

For example, an apartment building with 40 units, of which 3 are empty, has a vacancy rate of 3 divided by 40, or 7.5%. For commercial property, vacancy is often measured by floor area rather than number of units.

Vacancy rates affect property owners’ income directly. Empty space produces no rent but still incurs costs, such as property taxes, insurance and maintenance. Investors and lenders include an allowance for vacancy when forecasting a property’s income.

At the market level, vacancy rates indicate the balance between supply and demand. Low vacancy rates usually mean strong demand and rising rents, while high vacancy rates suggest weak demand or oversupply, putting pressure on rents and values. Office vacancy rates in many cities rose significantly after the pandemic, as companies adopted hybrid working. Vacancy is one of the key indicators followed by property analysts.