The difference between the gross potential rent at a property and the actual rent collected. An example of this would be an apartment complex with a 2-week preparation period for new tenants and a 50% annual tenant turnover. Assuming the property was 100% occupied (i.e. a physical vacancy of 0%), there would still be an economic vacancy of 1.85% (2/54 weeks x 50%) whereby the property owner would only receive 98.15% of his annual cash flow.

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