Argus Question - General Vacancy/Static Vacancy

Based on the most helpful WSO content, here's how general vacancy (GV) is typically calculated in Argus and how it interacts with static vacancy:

1. General Vacancy Factor in Argus:

   • General vacancy is applied as a percentage of the potential gross revenue (PGR). It acts as a buffer to account for market vacancy or other risks, such as tenants falling behind on rent or going bankrupt.
   • In Argus, if you have a static vacancy (e.g., 7% of the space held vacant throughout the hold period), the general vacancy factor (e.g., 10%) is adjusted to avoid double-counting vacancy losses.

2. How Argus Adjusts General Vacancy:

   • Argus deducts the static vacancy from the general vacancy calculation. For example, if you have 7% static vacancy and a 10% general vacancy factor, Argus will only apply the general vacancy to the remaining occupied space.
   • This ensures that the general vacancy is not applied to the portion of the space already accounted for as static vacancy.

3. Why You See 2.3% of PGR:

   • The 2.3% average annual general vacancy you're seeing is likely the result of Argus prorating the general vacancy factor after accounting for the static vacancy and any absorption/turnover vacancy. The exact formula depends on the lease rollovers, downtime assumptions, and how much of the space is already vacant.

4. Key Considerations:

   • If the static vacancy (7%) exceeds the general vacancy factor (10%), Argus will not apply any additional general vacancy, as the static vacancy already covers the risk.
   • The interaction between rollover, downtime, and static vacancy can further influence the effective general vacancy applied.

To back into the calculation, you would need to: - Identify the potential gross revenue (PGR) for each year. - Subtract the static vacancy (7% of space) from the PGR. - Apply the general vacancy factor (10%) to the remaining revenue after accounting for static vacancy and any absorption/turnover vacancy.

If you're still unclear, reviewing the Argus manual or consulting with someone experienced in Argus modeling might help clarify the specific methodology used in your scenario.

Sources: General Vacancy Deductions