Economists use the Gini coefficient to measure income inequality within a nation or subgroup. This same tool can illuminate how office vacancy is distributed within office markets nationally.
A Gini coefficient close to 1 indicates that vacancy is largely confined to one or two submarkets, usually those with a lot of older office stock.
Markets with the highest Gini coefficients include Las Vegas, Raleigh, Jacksonville, Phoenix and Orlando, which have vacancy rates that are concentrated in a small number of struggling assets. However, most of the market is in much better shape than the headline vacancy rate suggests. These markets have generally seen aggressive new supply growth, resulting in older stock becoming functionally obsolete and struggling to attract tenants.
Headline vacancy better reflects the market's overall health in Washington, D.C., Manhattan, Minneapolis and others with low Gini coefficients. These markets generally see less vigorous supply growth and older stock continues to vie for tenants relatively effectively. No market has a Gini coefficient lower than 0.67-a reminder that even in markets with the most evenly distributed vacancy, leasing success is achieved on a property-by-property basis.