Vacancy Rate

Percentage of all units or space that is unoccupied or not rented. On a pro-forma income statement, a projected vacancy rate is used to estimate the vacancy allowance, which is deducted from potential gross income to derive effective gross income. See also Absorption Rate; Break-Even Point; Occupancy Level.

The percentage of all units or space that is unoccupied or not rented. On a Pro-Forma income Statement a projected vacancy rate is used to estimate the vacancy allowance, which is deducted from potential Gross Income to derive effective gross income.
Example: The vacancy rate for apartment units in Boom City is currently 4.5%. For the Hightower Building, the vacancy rate is 9.5% (of 100,000 square feet of Net Leasable Area 9,500 square feet are not rented). If this 9.5% vacancy rate is expected to be the average through next year, a vacancy allowance of $95,000 (at $10 per square foot) should be deducted from potential rent when projecting income.