Physical vacancy is the amount of units that aren't physically occupied divided by the total number of units. If 2 units are physically vacant at our 20 unit the vacancy rate is 2 / 20 = 10%  

Economic vacancy is the amount of tenants that are actually paying. If 2 units are physically vacant at our 20 unit the vacancy rate is 2 / 20 = 10%.  If 1 of the other 18 units tenants is not currently paying our total vacancy is now 3 / 20 which is 15%.