Glossary
Calculations & Formulas
Vacancy Factor
The percentage of a building's total leasable area that is vacant during the reconciliation period. The vacancy factor affects the gross-up calculation and, when misapplied, can inflate the CAM pool or each tenant's allocated share.
Firm impact
The vacancy factor is the input variable that drives gross-up calculations. When a landlord uses an understated occupancy figure (overstating vacancy), the gross-up factor increases and so does each tenant's bill. Verifying the actual occupancy percentage against the rent roll is a direct audit step.
How this gets abused
A landlord reported 60% occupancy to justify a 1.58 gross-up factor, when the actual rent roll showed 78% occupancy during the reconciliation year. The inflated gross-up factor added $67,000 to the variable expense pool across all tenants.
Practitioner note
Request the rent roll or occupancy certificates for the full reconciliation year. Compare the actual occupied SF percentage against the occupancy figure used in the gross-up calculation. Even small discrepancies in the occupancy rate generate large dollar differences.
FAQ
Questions about vacancy factor
What is the standard gross-up target occupancy in most commercial leases?
95% is the most common target. Some leases use 90% or 100%. The target determines the maximum gross-up factor. When actual occupancy is above the target, no gross-up applies.
Can my firm verify the vacancy factor from public records?
In some markets, vacancy data is available from commercial real estate data providers. However, the lease-year-specific occupancy should come from the landlord rent roll. Request it as part of the standard audit document package.
You know the term. Now check the math.
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