What is vacancy rate?

If you search on the internet, the definition is a bit hard to understand. Over here, I just want to make it simple.
Vacancy rate is simply means, out of the total available units, how many are vacant.

Office vacancy rates are a numerical calculation of all office space that is available to rent in any given market.
They are calculated as a percentage and is the opposite of the occupancy rate (which measures how many properties have tenants).

Vacancy rate formula as shown below:

For example, if one of the condominium has 221 units, and there are 35 units are vacant. What will be the vacancy rate?
Vacancy Rate = 35/221 x 100%
= 22.62%

It is the opposite of the occupancy rate,which measures how many units have tenants. In example above, the occupancy rate is 77.38%

Important of vacancy rate

As an investor, vacancy rate is one of the index to be considered. It may not be the most important factor, but it play an important role in decision making.
Low vacancy rates are a sign that the property are in high demand. The tenant are lining up to move in. Low vacancy rates are good news for landlords and investors like us who aim for the rental income.
The lower the vacancy rates, the rental competition will be stiff. In such case it just means an increase in rental rates due.

High vacancy rate could tell you that there might have problem with the property, management company or the surrounding such as security issue etc.
At any property with high vacancy rate, the property will have difficulty to rent out their unit.

How to determine vacancy rate

You may ask your agent during your unit viewing. But most of the time, the agent will not have any good answer for you. This is because they do not ever done any research or have any statistic on hand.

So how do we do this? There are several way scientifc and non scientific.

Method 1:

1. Go to the condominium or apartment, sample count on few floors and table it out
2. For example, there are 3 Blocks with 14 storeys, each storey has 20 units.
3. Simple tabulation is as below:

Based on the table above, it can observed that although 3 blocks are within the same project, but Block C has the highest vacancy rate.
With this statistic, you may go to Block C and do more research and understand it better. You may find out some hidden factor that causing low occupancy rate in Block C.

Below are another 2 examples on how to conduct vacancy rate using this method.
a) Pangsapuri Widuri vacancy rate check
b) The IDEAL CEO vacancy rate check

Method 2:

1. During night time or early in the morning, go to check their parking lots.
2. By observation, will be able to estimate how high the occupancy rate.
3. If a lot of cars have to park outside the condo or apartment, it means that the internal parking is full.
4. Imagine if you buy the property with 2 car parks, your car park basically can generate another income for you.

Method 3:

1. Go to the condo and apartment around 9pm.
2. Have a look at the unit have ON the light.
3. Count it and make an estimation.

Although Method 2 and Method 3 is not scientific way, but it will give a good feeling on the vacancy rate if it is high or low.
It is still much better than asking Property agent. If you need better statistic, then the Method 1 is the best, but need more works to get the data.

What is the acceptable vacancy rate?

Just like there is never have zero unemployment, there will never be zero vacancy rate. The tricky question is what is the acceptable vacany rate.
Normally for my own guideline, the vacancy rate should be less than 30%. For a very good location and hot place, the vacancy rate coule be as low as 5% to 10%. So 30% vacancy rate is my own guideline.