Market vacancy for the area is 7%, but the subject has run 2% for a decade under long-term leases expiring in eight years. The vacancy allowance should reflect:

Correct Answer

D) The subject's supportable performance, with the departure explained

Why this is correct: The governing concept is that stabilized vacancy is a forward-looking estimate of typical vacancy for the subject property, not a mechanical import of either market averages or historical figures. When long-term leases securely in place support a below-market vacancy rate for a reasonable forecast period, that supportable performance should be used, with a clear explanation of the departure from the market norm. Why the other choices are wrong: "The average of the two figures by rule" is incorrect because there is no rule requiring averaging; the forecast must be reasoned. "Exactly 7%, the published area-wide figure, without permitting any exception" is incorrect because the subject's specific lease structure can justify a different estimate. "Zero, since the building is nearly full" is incorrect because vacancy allowance accounts for future turnover, not just current occupancy. Exam tip: Always justify a vacancy departure with specific subject evidence, such as lease terms, and document it in the report.