Vacancy Rate
The percentage of available space in a market or property that is unoccupied and available for lease.
Definition
Vacancy rate is the ratio of unleased space to total leasable space, expressed as a percentage. It's a primary indicator of market balance between supply and demand. Low vacancy (under 5% for industrial) typically indicates a landlord's market with upward rent pressure. High vacancy (above 10%) suggests a tenant's market with potential for concessions. For individual properties, vacancy directly impacts NOI and property value. Small bay industrial has historically maintained lower vacancy than large-format industrial due to limited new supply, fragmented tenant demand, and the essential nature of the businesses it serves. Vacancy is usually reported as direct (space available from landlord) or sublease (space available from current tenant).
Formula
Vacancy Rate = (Vacant SF / Total SF) × 100Example
A 50,000 SF multi-tenant property has 4 vacant units totaling 8,000 SF. Vacancy rate = 8,000 / 50,000 = 16%. At $14/SF NNN, this vacancy costs approximately $112,000 in potential annual revenue. Reducing vacancy to 5% would add $77,000 to NOI.