While unrealistic, for purposes of this exercise, we’ll assume that all rental lease commitments are on a 12-month basis. The residential building has a total of 100 units available for rent, with each unit priced at the same monthly rate of $4,000. Suppose the property manager of a residential building is attempting to determine the expected vacancy loss in anticipation of the upcoming year, 2023. We’ll now move to a modeling exercise, which you can access by filling out the form below. Vacancy Rate → The vacancy rate is the implied percentage of units that are unoccupied and can be computed as one minus the occupancy rate.Gross Scheduled Income (GSI) → The gross scheduled income is the total amount of potential rental income that could be generated by commercial property, assuming the property is at full capacity, i.e.The two inputs in the formula are the gross scheduled income and the vacancy rate: Vacancy Loss = Gross Scheduled Income (GSI) × Vacancy Rate.The formula for calculating vacancy loss is as follows. unavailable space due to construction), and retention of existing tenants.įor property owners striving to reduce their vacancy loss, the following measures can be taken: ![]() When projecting the anticipated loss, assumptions are necessary regarding the conditions of the real estate market, tenant demand, property conditions (i.e. The resulting amount is the rental income lost by the unoccupied units. ![]() the rental income if all units were occupied. The process of calculating the real estate metric involves multiplying the vacancy assumption by the gross potential income generated by the property, i.e. ![]() While there is a negative connotation attached to the term, it can also be viewed as representing the potential rental income that could be earned in the future. The vacancy loss refers to the dollar amount of rental income lost because of unoccupied units, where there are no tenants. How to Calculate Vacancy Loss (Step-by-Step) Vacancy Loss, or “credit loss”, is the rental income lost by a property owner from unoccupied space, i.e.
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