To answer the question, we need to consider the context: are we interested in relative or absolute risk?

Vacant units should be priced to deliver a higher return, as the return from a portfolio of vacant units will be more sensitive (volatile) to changes in rents and expected letting periods.

A portfolio with a lower vacancy rate will, ceteris paribus, therefore be expected to generate lower relative performance than a portfolio with a higher vacancy rate. For a manager seeking to out-perform a benchmark, a lower vacancy rate simultaneously increases the chance of under-performance, but also reduces absolute risk.