What is a Vacancy Rate?

The Vacancy Rate is referred to the percentage of all of the available units in a rental property, like an apartment complex, hotel, etc. These are the units that are unoccupied at a specific time.

The opposite of Occupancy Rate, if the vacancy rate is on the higher side, it denotes that the property is not renting adequately. On the contrary, a lower vacancy rate points out to a significant rental sale. Along with being used for analysing the Real Estate, the vacancy rate mechanism is also applied to the employment sector.

Vacancy Rates in Real Estate

For property owners, the vacancy rate is quite an essential determinant as it enables them to figure out how their buildings are performing in comparison to the vacancy rate area. Furthermore, such a rate is also considered as an Economic Indicator as it clears out the scenario of a broader Market condition.

In the domain of real estate, often, vacancy rate signifies units that are vacant and ready to be put on rent, units that have been closed upon the tenant’s exit and units that are not rentable currently because they need renovations or repairs. As mentioned above, lower vacancy rates are regarded positive as it basically means that people wish to reside in that specific building or area and vice versa.

This rate is evaluated by multiplying the number of vacant units by 100 and dividing the result by the total number of units. Thus, the formula to calculate vacancy rate is:

Vacancy Rate = Number of Vacant Units x 100 / Total Number of Units

Keep in mind that the total of both occupancy and vacancy rate should add up to 100%. Let’s take an example here. Suppose a residential building has 300 houses. Out of them, 30 are unoccupied; this means that the vacancy rate will be:

Vacancy Rate = 30 x 100 / 300 = 10%

To use this method effectively, the vacancy rate for one property should be used to compare the vacancy rate of a similar property. This means that comparing a residential building and a hotel doesn’t yield proper results. Similar to this, there are other factors that should be considered as well. For instance, vacancy rates in a small town will always be different than that of a metro city. Or, vacancy rate in the middle of a city will be far different than that of the outskirts of the same city.

Vacancy Rates in Employment

In terms of employment, the vacancy rate can be applied to the number of positions that are currently open in a company as compared to the total number of positions that are available throughout the firm. In simple words, vacancy rate that is used in the employment sector indicates the proportion of positions that a firm has allocated for the performance of specific duties and responsibilities that don’t have an employee operating in that space.