Vacancy is the cost that never appears on an invoice. Nothing is billed, nothing is paid, and the only evidence of it is income that did not arrive, which makes it the easiest large number in property to ignore.
Two ways to measure it, and they disagree
By unit. Vacant units divided by total units. Three of forty units vacant is 7.5%.
By value. Rent foregone divided by potential rent. If the three vacant units are the three most expensive in the block, the same 7.5% by count might be 11% by value.
The second is the one that matters, because it is the one that shows up in the bank account. Measuring by unit count is how a portfolio reports a healthy figure while its best units sit empty.
Including the days, not just the months
A unit vacant for nine days between tenancies is a real cost, and a monthly count records it as either fully occupied or fully vacant depending on which day somebody looked.
Measured properly over a year:
| Line | Amount | | --- | --- | | Potential annual rent, 40 units | 18,240,000 | | Rent foregone, all vacancies, by day | (1,094,400) | | Vacancy loss | 6.0% |
Six per cent of gross income, which on that portfolio is more than a year of management commission. It is worth measuring to the day for the same reason arrears are worth ageing: the aggregate hides where the problem is.
The void period, which is the controllable part
The gap between one tenancy ending and the next beginning is made of four stages, and each one is somebody's job:
- Notice to marketing. How many days between the tenant giving notice and the unit being advertised? This should be near zero and frequently is not, because the notice sat in an inbox.
- Marketing to viewing. Depends on demand and on how quickly enquiries are answered.
- Viewing to agreement. Depends on how fast the paperwork and the references move.
- Agreement to occupation. Cleaning, repairs, meter readings, handover.
Stage one and stage four are entirely within your control and are where most avoidable void days live. A unit that could not be relet for eleven days because nobody booked the cleaner is not a market problem.
What drives the rest
Rent set above the market. The most expensive mistake, and the hardest to admit. A unit held empty for two months to protect a KES 3,000 monthly increase has lost more than the increase will recover in a year.
Condition at handover. Units that show badly let slowly, and the discount is paid in void days rather than in rent.
Turnover itself. A block with a two-year average tenancy has half the void events of one with a one-year average, which is why retention is a vacancy strategy as much as a relationship one.
What goes wrong
It is never measured. An owner sees the rent that arrived and has no comparison to the rent that was possible, so vacancy is felt as a quiet disappointment rather than measured as a number.
It is measured monthly by count. Which misses part-month voids entirely and weights a bedsit the same as a three-bedroom.
Service charge on vacant units is forgotten. The unit earns nothing and still attracts its levy, so a vacancy costs more than the rent foregone.