Economic vacancy is the share of potential rent a building never collects, for any reason: empty units, unpaid rent, concessions, employee or owner units, and the downtime between tenants. It is measured in dollars rather than in doors, which is why it is usually the larger number.
- Rebuild it from bank deposits, not from the rent roll. The roll records what was billed; the account records what arrived.
- Concessions hide inside it. Free months make a building look full at a rent it is not actually earning.
- Owner-occupied and employee units are real economic vacancy even when nobody considers them vacant.
- A single stabilised assumption applied to an unstabilised building is the most common error in a small-building proforma.
The same eight units: one empty for the year, plus uncollected rent and a concession given to fill a unit.
Counting doors said 12.5%. Counting dollars says 16.0%, and the underwriting assumed 5%. The difference is the deal.
Related terms
All termsVacancy Rate
The vacancy rate is the share of units, or of rentable area, sitting empty at a point in time.
OwnershipRent Roll
A rent roll is the schedule of every unit in a building and what it earns: the tenant, the rent, the lease start and end, the deposit held, and whether the unit is occupied.
InvestmentNOI (Net Operating Income)
Net operating income is what a property earns from operations in a year: all collected income minus operating expenses, before any mortgage payment, income tax, or capital projects.
Terms arrive with the writing.
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