The direct answer
Physical vacancy measures unused capacity, such as empty unit-days. Economic vacancy measures lost income relative to potential income, which can include concessions or unpaid rent. They can differ because vacant units have different rents and occupied units may not pay the full scheduled amount.
Match vacant and available capacity
For a single unit, divide empty days by available days over the same period. For several units observed over time, use unit-days in both numerator and denominator. A snapshot of vacant units answers a different question from annual empty days. If a unit is removed from rental availability, decide consistently whether to exclude its capacity instead of counting it as both unavailable and vacant.
To apply the approach to an editable scenario, use the Vacancy Rate Calculator. For the neighboring question, explore Break-Even Occupancy Calculator.
Calculate the income-loss relationship separately
Potential rent minus the relevant collected rent gives the income shortfall for an economic comparison. Define whether concessions, bad debt and unavailable units are included. The capacity calculator has no rent-by-unit ledger, so it cannot infer economic vacancy from a physical vacancy percentage. Feed an income-loss assumption into a rental-income model only after deciding what that allowance represents.
Examine the pattern behind the percentage
One long vacancy and several short turnover gaps can have the same annual capacity loss but different leasing and repair costs. A snapshot can also miss a seasonal pattern. Record the period and denominator, then connect the vacancy assumption to turnover expenses and collection evidence. Neither a physical rate nor a single economic rate explains all operating risks by itself.
Worked example
Thirty vacant days out of 365 available days equals 8.22% physical vacancy. For an independent income example, $36,000 potential rent and $32,400 collected rent imply a 10% income loss. The two rates need not agree because income loss can include more than empty days.
Common mistakes and limitations
Do not divide a yearly vacant-day count by a single-day unit count. Vacant capacity cannot exceed available capacity; that usually signals mismatched periods or an incorrect denominator.
Physical vacancy and economic vacancy are different concepts; label the selected method clearly.
Frequently asked questions
Can an occupied property have economic vacancy?
Yes. Unpaid rent or concessions can create income loss even when no units are physically empty.
Does the units mode calculate an annual vacancy history?
It calculates the supplied vacant-unit share. To describe a full period, use consistently aggregated capacity observations or unit-days.
Sources and further reading
The article’s examples are illustrative arithmetic. The references below provide context for operating, valuation or transaction concepts; they do not endorse the assumptions or the calculator.
- IRS — Publication 527 (2025), Residential Rental PropertyRental income and expense concepts; operating/rental expense context.
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