In the real estate market, many indicators and trends are of potential interest to investors, property owners, and building managers. The vacancy rate for an area is a common figure to watch. Learn what information an area’s vacancy rate can reveal and how you can find an area’s vacancy rate.
What Is a Vacancy Rate?
The vacancy rate for an area simply calculates how many properties are available for rent compared to the total number of rental properties in the area. In other words, what percentage of rental units are not occupied?
Vacancy rates are calculated for residential rental markets as well as commercial markets, which include retail, office, and industrial spaces. An area’s vacancy rate can vary significantly between different parts of a city.
Why You Want to Know the Vacancy Rate
Generally, you analyze vacancy rates to assess the market rental conditions in a particular area.
The federal government and economic forecasters use the rental vacancy rate, as one component in the index of leading economic indicators, to evaluate the current economic climate. Property owners and investors use an area’s vacancy rate for additional purposes:
- An area’s vacancy rate can be used as a benchmark. For example, if you own a multifamily rental development that experiences an increase in turnover, then knowing the surrounding area’s vacancy rate could be useful in comparison. If the neighborhood’s vacancy rate has not changed significantly, then your own building’s higher vacancy rate indicates a likely issue with the property management, property condition, or tenants.
- When seeking out commercial space, you can use vacancy rates to identify locations with abundant available space at lower costs per square foot.
- If you invest in rental properties, the average vacancy of both the building and the area is among the most important factors to consider. A high vacancy rate indicates less revenue, as the property will have fewer tenants occupying fewer units. High vacancy rates also indicate the area is less appealing to renters.
Sources of Vacancy Data
1. Census Bureau
The Housing Vacancies and Homeownership data compiled by the U.S. Census Bureau provides current information on rental and homeowner vacancy rates for the United States, regions, states, and for the 75 largest Metropolitan Statistical Areas (MSAs). Data is published quarterly and annually. Estimates of the total housing inventory and percent distributions of vacant for-rent and for-sale-only units are available for the United States and regions.
These large datasets are best used for obtaining residential rental vacancy rates for large regions or one of the largest MSAs. Individual neighborhood rates cannot be calculated with this data.
2. HUD-USPS Vacancy Rate Data
The U.S. Department of Housing and Urban Development (HUD) receives data from the United States Postal Service (USPS) every quarter. The USPS provides aggregate counts of residential and business addresses that are collected by postal workers and identified as being vacant (i.e., not collecting mail) for at least 90 days.
Per agreement with USPS, HUD can make the data accessible only to governmental entities and non-profit organizations.
3. Industry Reports
Several real estate industry associations and regional organizations or agencies regularly gather occupancy data. Some publish regular reports with detailed analysis of specific markets. A few examples are below:
- The National Association of Realtors releases quarterly Commercial Real Estate Market Trends and Outlook reports.
- Colliers International publishes several reports, such as the quarterly U.S. Office Market Outlook Report.
- Local chambers of commerce, local real estate professionals’ organizations, regional planning associations, transit agencies, and city governments routinely track area vacancy rates.
In addition to the formal industry data, informal information can be collected from an area’s property owners and managers by simply asking.