# Vacancy

Sebnitz market square is reflected in the vacant shop

With a vacancy ( English vacancy ) is unused or unlet buildings or plots of land in private or public property . The opposite is the lack of living space .

## General

Vacancy presupposes that existing capacities are not used or not fully used unplanned. If, on the other hand, reserve capacities are deliberately kept, there is no vacancy. In the case of open spaces (such as front gardens ), it is also often not vacant. The term vacancy refers to all economically usable properties, i.e. vacant land , residential or commercial properties . Most of the vacancy but with real estate associated and is then the sum of all residential and commercial space , which to a certain date are unused, due for rent or sale, and within three months to move in are.

## species

A distinction is made between the structural (economic), building-specific, speculative and vacancy through fluctuation:

### Structural vacancy

The causes are demographic changes, the economy , the market situation on the real estate market and the supply in the area. About the need for addition built apartments / business premises lead especially during the recession to excess supply or demand gap , which manifests itself as by a lack of interest or need change on the demand side. Vacancy risks decrease or disappear in times of economic boom . However, this compensation does not always work, even if demand rises again, because “office markets are often subject to cyclical fluctuations ” because there are delays in construction and planning. The vacancy risk increases with falling rents / purchase prices and correspondingly lower demand , the real estate market becomes a tenant market ( buyer's market ), in which the tenant / buyer has the bargaining power . Conversely, a rental market can arise from supply gaps or excess demand ; There are hardly any vacancy risks here.

### Building-specific vacancy

The building or property-specific vacancy results from the property itself, for example due to its unfavorable location , poor micro-location or poor property properties of a certain building ( e.g. junk property ). The location refers to an unfavorable location of real estate; a bad micro-location would be, for example, apartments in the industrial area (so-called mixed areas according to § 6 Abs. 1 BauNVO ). This vacancy is not triggered exogenously by the real estate market, but the reason is to be found in the building itself. The vacancy that is deliberately accepted for renovation purposes is also a building-specific vacancy.

### Speculative vacancy

Speculative vacancy refers to building space that, despite the possibility of using it, is not rented or sold by the owner because the owner is speculating on a higher rental yield . Long-term, avoidable private vacancies of apartments sometimes take on the rank of an administrative offense if the state has a justified interest in the maintenance or management of these buildings. This is especially true in large cities such as B. Hamburg is the case: Examples of this are listed buildings that may be demolished after a long period of vacancy and due to the deteriorating condition of the building despite being listed. In principle, a landlord may increase the rent within the scope of the cap and the fixed rental price as soon as the previous tenant has vacated the property. Properties whose construction or management has been subsidized by the state ( social housing ) are also affected . If such buildings are left empty for a long time, the protection of existing buildings can also be lost . Speculative vacancies were repeatedly the reason for squatting , for example in the Frankfurt house-to-house war or in Hafenstrasse in Hamburg.

### fluctuation

The fluctuation indicates the frequency of tenant changes. Vacancy can arise when a new rental agreement cannot be concluded with a successor without a transition after a rental agreement has expired. A fluctuation in excess supply or a lack of demand leads to a reduction in the rental price; conversely, gaps in supply or excess demand lead to rent increases. In order to guarantee the flexibility (and thus the functionality) of the real estate market, a vacancy reserve (fluctuation reserve) of approx. 3% makes sense. One approach to a solution can be interim use, for example based on the principle of “guarding through habitation”.

## Legal issues

The vacancy also concerns legislators and case law in connection with the waiver of property tax in the event of significant reductions in income. Examples of this are "crop failure in agriculture and forestry companies due to natural events (floods, drought, hail, etc.), vacancy of apartments or business premises due to lack of tenant demand for the objects in question, no possibility of utilizing self-employed factory properties after a structurally determined Abandonment of the previous production ”. According to Section 33 (1) Sentence 1 GrStG , property tax is waived to a certain extent if the normal gross profit is reduced by more than 50% in the case of developed land and the tax debtor is not responsible for the reduction in gross profit.

According to a ruling by the Federal Administrative Court (BVerwG), a property tax waiver is not only possible in the case of atypical and temporary reductions in income, but also due to a structural, not just temporary vacancy. As a point of reference for determining the tax-relevant reduction in income, the Federal Fiscal Court (BFH) had previously specified that for properties that were rented at the beginning of a calendar year, the reduction in gross income should be determined on the basis of the rent agreed at that point in time, provided that this is not by more than 20% deviates from the usual rent and is to be determined for other properties on the basis of the usual rent. In the case of property used for commercial purposes, a further requirement is that the property tax would be unreasonable according to the economic circumstances of the business. According to the BVerwG, this is the case if the tax-relevant operating result is negative and the property tax makes up a not insignificant share (more than 1%) of the total operating expenses .

## economic aspects

When it comes to management , economic efficiency and profitability , vacancy rates and vacancy risk play a major role.

### Economy and profitability

The goals of economic efficiency and profitability can only be achieved if existing capacities are fully used, i.e. the capacity utilization or the degree of utilization are (almost) 100% of the capacity. There is therefore vacancy if the rate is unintentionally below 100%. Then there are idle costs (unused fixed costs with empty capacity ) and / or loss of income ( loss of rent ), which reduce the profit or increase the loss. Vacancy costs for a temporary vacancy are to be taken into account as a risk of loss of rent in the context of management costs in accordance with Section 19 (2) No. 3 ImmoWertV , while the vacancy costs of a permanent vacancy reduce gross profit.

### Vacancy rate

The vacancy rate is an economic key figure that shows the proportion of vacant properties in the total stock:

${\ displaystyle {\ text {Vacancy rate}} = {\ frac {\ text {Vacancy}} {\ text {Total stock}}} \ cdot 100 \, \%}$.

The higher the vacancy rate, the lower the profitability and profitability and vice versa. If the rental property is in a bad location, there is a higher rental return with a high risk of vacancy and rent default. A higher vacancy rate results in lower capacity utilization or a lower degree of utilization. In the hotel industry , the occupancy rate is the reciprocal of the vacancy rate:

${\ displaystyle {\ text {Occupancy rate}} = {\ frac {\ text {occupied rooms}} {\ text {available rooms}}} \ cdot 100 \, \%}$.

It is the most important economic key figure in the hotel industry because the room occupancy is the largest source of revenue. The seat load factor ( passenger transport ) and the load factor ( air freight ) are similar key figures in civil aviation .

Vacancy rates play a role both in the valuation of real estate companies and as an economic indicator . Due to the various causes, the complete vacancy rate in a city can only be recorded with great effort or high costs, and there is often a lack of clarity when recording vacancies.

The vacancy rate for short-term rentable apartments in Germany was around 3% in 2014, 1.7% in growth regions, 3.3% in stagnant regions and 5.3% in shrinking regions. The vacancy rates for office space in A locations in 2016 in Frankfurt am Main were 10.2%, followed by Hamburg (5.3%), Cologne (5.2%), Berlin (3.5%), Stuttgart (2, 8%) and Munich City (2.7%), the average was 5%.

### Vacancy risk

The vacancy risk is the landlord's economic risk that a property will temporarily have a vacancy rate. This risk represents an imputed cost component for the landlord, which is also taken into account in real estate valuation as part of the capitalized earnings method . It is part of the risk of loss of rent, which, in addition to the risk of vacancy, also represents the risk of loss of rent (i.e. non-payment of rent for rented objects).

In the case of social housing , the risk of vacancy is treated in the form of the risk of failure to pay . According to this, the risk of loss of apportionment is the risk of a reduction in income, which arises from uncollectible arrears of operating costs or non-allocable operating costs as a result of the vacancy of living space intended for rent. The risk of loss of apportionment may not exceed 2% of the operating costs incurred on the living space in the accounting period ( § 25a NMV ). Insofar as the coverage of defaults is secured differently, namely through a claim against a third party, the allocation may not be increased.

The vacancy risk also affects ancillary costs . Standing in a small apartment house empty individual apartments, the associated costs can not be passed on to the other tenants. If a distribution according to area has been agreed, the landlord cannot as a rule demand that unused areas should be omitted from the calculation. Long-term vacancies can endanger the preservation of buildings. The occurrence of moisture due to inadequate heating or dilapidated building structures with the corresponding visual consequences as a result of neglected renovation and maintenance measures up to the risk of collapse are often associated circumstances. In addition, vacancies are causing financial losses for the owners of the buildings and the affected municipalities.

## urban planning

In urban planning the different types of need conversion are taken into account, which can lead to vacancies. The most important visual indicator of a municipal vacancy risk are existing urban wastelands or redevelopment areas where urban redevelopment measures are taking place.

## Risk management

The vacancy risk is monitored by risk management ( vacancy management ). The task here is to recognize early indicators of fluctuation ( termination by tenants) and to react to this at short notice by making use of existing notice periods by re-letting. Structural vacancies can be countered through better construction planning and observation of market developments . A rental income community is an instrument to limit the risk of vacancy through a kind of insurance. Even rental guarantees or temporary use or change of use or demolition of properties can reduce the risk of vacancy. For the treatment of the large vacancies in the areas of the former GDR see urban redevelopment .

Wiktionary: vacancy  - explanations of meanings, word origins, synonyms, translations

## Individual evidence

1. Jörg Schmidt, Rent & Manage Commercial Properties , 2006, p. 433
2. Diego Pergher / Thomas Marti, vacancy management , 2015, p 37
3. ^ Eduard Mändle / Markus Mändle (eds.), Housing and Real Estate Lexicon , Haufe Freiburg i. Br., 2011, ISBN 978-3-87292-300-4 , p. 1059
4. ^ Nico Rottke, How the real estate market works , in: Nico Rottke / Matthias Thomas (eds.), Real Estate Economics, Volume I: Management , Cologne 2011, pp. 119–139
5. Vacancy detector. WDR, January 8, 2013, archived from the original on January 19, 2013 ; accessed in 2014 .
6. ^ Raphael Spieker, Shrinking Markets in the Housing Industry , Vandenhoeck & Ruprecht , Göttingen 2005; ISBN 3-89971-246-3 ; P. 32
7. BT-Drs. 6/3418 of May 4, 1972, Draft of a Second Tax Reform Act , p. 95
8. BVerwG, decision of April 24, 2007, Az .: GmS-OGB 1.07
9. BFH, decision of February 26, 2007, Az .: II R 5/05 = BFHE 218, 396
10. Real Estate Economic Factor 2017, Real Estate Market Report Germany 2017 , p. 30
11. Real Estate Economic Factor 2017, Real Estate Market Report Germany 2017 , p. 36
12. BGH, judgment of May 31, 2006, Az. VIII ZR 159/05