Encyclopedia
Vacancy rate
The share of space that's vacant.
For example: A tenant checks vacancy rates before negotiating. (Illustration only, not a real deal.)
This is a general industry term with no single official definition. Your lease or contract wording controls.
Example only, not a real client. Say you are pricing a small office building and the market vacancy rate has risen. You use a higher vacancy allowance in your numbers than the seller did, which lowers the price you are prepared to pay.
What I’d tell a friend
Look at vacancy for your specific type of space and location, not just a headline figure.
Why it matters to you
High vacancy gives tenants more leverage on rent and inducements. Low vacancy can push rents up and make it harder to find space, so it shapes how hard you can negotiate.
How to use it in your deal
Buyers should compare the building's vacancy with the market and ask why space is empty: price, condition, layout or location. Budget for some vacancy even in a full building, because tenants leave. Landlords should track vacancy trends in their submarket when setting rents and renewals. Tenants can use high vacancy to negotiate. Lenders apply their own vacancy assumptions, which may be higher than yours.
When you model a purchase, use a vacancy allowance that reflects the building and its tenants, not just the market average. A single-tenant building is either full or empty, so the risk sits in the lease term and the tenant's health.
Mistakes I see
Assuming zero vacancy in a pro forma. Using a citywide average for a specific property type. Ignoring sublease space that's effectively vacant.
In BC and Vancouver
Canada Mortgage and Housing Corporation (CMHC) publishes rental market data for residential buildings. Commercial vacancy data comes from industry reports, which vary by method; check the source and date.
Official sources: Canada Mortgage and Housing Corporation
What it measures
A vacancy rate is the share of space in a market that is empty and available. It is reported by type, such as office, industrial or retail, and by area.
Rising vacancy usually means more choice for tenants and softer rents; falling vacancy means the opposite.
How to use it
Tenants can use high vacancy to negotiate better terms. Owners and buyers should build a realistic vacancy allowance into their income.
Different sources measure vacancy differently, so compare like with like.
Questions to ask before you sign
- What's the market vacancy for this property type and area?
- What's this building's history?
- Why is space empty?
- What vacancy should I budget?
- What does my lender assume?
Keep reading
Related terms: Market rent
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General information for British Columbia only. It isn’t legal, tax, accounting or financial advice, laws and rates change, and reading it doesn’t make you my client. Any numbers or scenarios are hypothetical. Check the linked official source and talk to a lawyer, accountant or other qualified professional before you act or sign anything. See the terms and disclaimer.