the percentage of all units or space that is unoccupied or not rented. On a pro-forma income statement a projected vacancy rate is used to estimate the vacancy allowance, which is deducted from potential gross income to derive effective gross income.

Example:The vacancy rate for apartment units in Boom City is currently 4.5%. For the Hightower Building, the vacancy rate is 9.5% (of 100,000 square feet of net leasable area, 9,500 square feet are not rented). If this 9.5% vacancy rate is expected to be the average through next year, a vacancy allowance of $95,000 (at $10 per square foot) should be deducted from potential rent when projecting income.