What is Vacancy Rate?
Vacancy rate is the percentage of a property's rentable space (or a market's total space) that is unoccupied and available. A higher vacancy rate signals weaker demand and lower income; a lower rate suggests a strong market. Investors factor an expected vacancy allowance into NOI rather than assuming 100% occupancy.
Example: An office building with 2 of 20 suites empty has a 10% vacancy rate, which the investor builds into the income projection rather than assuming every suite stays rented.