Vacancy Rate / Occupancy Rate

Vacancy rates tell buyers / investors, lenders and appraisers what portion of a property is not productive and thus not generating income.  A market vacancy rate is calculated by dividing the number of vacant units by the total number of units, or the number of vacant square feet by the total number of square feet available in the market.  If a 5.0% vacancy rate is found for industrial buildings in the market, and the property that you are analyzing has a 20% vacancy rate, clearly the property that you are analyzing has an atypically high vacancy rate.

Well-managed properties in strong real estate markets often have a 0% to 5% vacancy rate, which is a rate that basically takes into account the typical tenant turnover within a building.  Generally strong population growth and low unemployment rates go hand in hand with low vacancy rates.  Economic slow-downs (like the recession of 2008) can, however, cause increased vacancy rates.  Metropolitan Las Vegas has seen vacancy rates in some commercial market segments climb into the 10% to 20% range in 2008.  A vacancy rate above 20% usually indicates a serious problem with a property or with the market. 

Since commercial properties are bought and sold based on income production, an atypical high vacancy rate can effectively reduce the value of a property.

A 20% vacancy rate indicates an 80% occupancy rate or level, thus as the vacancy rate increases the occupancy rate declines.        

Contact us with your questions or concerns regarding vacancy rates / occupancy rates or regarding your specific appraisal assignment in Nevada at 1-702-568-6699.  We can also be e-mailed at grigdon@cox.net.  

Commercial Real Estate Appraisals in the Las Vegas & Henderson, Nevada Area.