Real Vacancy Rate (Area)
What is it?
Real Vacancy Rate (Area) is a key performance indicator that measures the percentage of the total leasable area in a property or portfolio that is currently vacant and not generating rental income. This metric provides an indication of how effectively a property is being utilized and how much of the available space is not under lease.
In Homepal, real vacancy is defined as "non-let if lettable". Thus, only rental properties that are available are included - vacant, blocked or similar are excluded in this value.
How is it calculated?
(Available rentable area / Total rentable area) x 100 = Real Vacancy Rate (Area)
* Includes only rentable area that is real vacant, eg. blocked or similar will not be counted as vacant.
Why is it important to follow?
Tracking the real vacancy rate (area) is important because:
Indicator of market demand for the property
A high vacancy rate may indicate a lack of demand for the space, which can negatively impact revenue.
Management and optimization
A low vacancy rate indicates that the property is being effectively utilized, which is positive for cash flow and profitability. By monitoring the vacancy rate, property managers can proactively work to improve leasing strategies and align the property’s offerings with market needs.
Risk management
Keeping track of the vacancy rate helps identify risks associated with vacant spaces and provides a basis for decisions on marketing efforts, renovations, or other actions to attract tenants.
Budgeting and forecasting
The vacancy rate directly impacts rental income and, therefore, budgeting and forecasting. Understanding the vacancy rate helps predict potential revenue shortfalls and adjust budgets accordingly.
Created by Homepal
9/11/2024
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