Vacancy Rate: Definition, Calculation, and Uses

What is a vacancy rate?

A vacancy rate is the percentage of all available units in a rental property (for example, an apartment complex or hotel) that are unoccupied at a given time. It is the inverse of the occupancy rate; together they total 100%.

How to calculate it

Use this formula:

vacancy rate = (number of vacant units / total number of units) × 100

Example: an apartment building with 300 units and 30 vacant units has a vacancy rate of (30 / 300) × 100 = 10%.

What counts as vacant

Vacant units can include:
* Units ready to be rented
* Units taken off the market after a tenant leaves (turnover)
* Units temporarily unrentable because they need repairs or renovations

Interpreting vacancy rates

• Low vacancy rates generally indicate strong demand and that a property or area is desirable.
• High vacancy rates suggest weak demand or problems with the property (price, condition, location).
• Vacancy rates are context-sensitive: compare only similar property types and comparable markets (e.g., don’t directly compare office buildings with low-rise apartment complexes or small towns with major cities).

Uses in real estate analysis

Owners, managers, and analysts use vacancy rates to:
* Measure property performance versus local market averages
* Assess the impact of rents, marketing, or renovations on occupancy
* Gauge supply/demand dynamics across a market when aggregated (commercial and residential vacancy trends are common market indicators)

Residential vacancy data

National statistical agencies regularly report residential vacancy metrics. For example, quarterly census reports typically include:
* Rental vacancy rate
* Homeowner vacancy rate
* Homeownership rate

These series help track housing-market health over time and can show long-run trends—vacancy rates rose sharply during the housing crisis and have since stabilized at lower levels.

Vacancy rates for investors

Investors use vacancy rates to evaluate income-producing properties:
* Compare a candidate property’s vacancy rate with similar local properties to judge performance.
* High vacancy may signal a need for price adjustment, improvements, or better marketing.
* Low vacancy can support higher rents and strengthen valuations, but may also indicate limited upside without further investment.

Vacancy rates in employment

The vacancy concept also applies to labor markets and organizations:
* An employment vacancy rate is the share of budgeted or authorized positions that are unfilled.
* When analyzed with turnover and hiring metrics, vacancy rates indicate how well an organization attracts and retains staff.

Key takeaways

• Vacancy rate = share of units that are unoccupied; occupancy + vacancy = 100%.
• Low vacancy typically signals strong demand; high vacancy signals weak demand or property issues.
• Use vacancy rates comparatively—across similar property types and markets—to make informed investment and management decisions.
• Aggregate vacancy data (residential and commercial) is a useful economic indicator; similar concepts apply to employment.