In one sentence
The gap between potential rent and actual collected rent, capturing physical vacancy plus concessions, delinquency, and non-revenue units.
The longer version
Economic vacancy is broader than physical vacancy: it counts not just empty units but rent lost to concessions, delinquency, and model or employee units. It is the true drag on collected income.
Lenders use economic vacancy rather than physical vacancy to underwrite conservatively, because a fully occupied property can still collect well below its potential.
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