Vacancy and Collection Losses (V/C)

Vacancy is the measurement of time, expressed in percentage of the GPI, that you would expect the property to not have a tenant. Every property will have periods of vacancy due to change-over in tenants plus market cycles that make it harder to find tenants.

Collection losses, much like vacancy in that no income is being collected, is when non-paying tenants are in the property and either need to be motivated or evicted. This too is expressed as a percentage figure of GPI.

The key to Vacancy and Collection Losses is that you can compare different types of properties in different market cycles. Perhaps an office in the higher price range will have longer occupying tenants, thus a lower vacancy, whereas a property in a student area can be expected to turn nearly every year, resulting in a higher vacancy. Using the correct figures for vacancy allows us to compare these two properties and determine which one is the better buy.

Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.