Commercial leases typically include annual rent escalations. The two most common methods are fixed percentage increases (e.g., 3% per year) and CPI-linked increases (tied to the Consumer Price Index). This calculator compares both methods over a 5-year lease term.
Fixed %: Year N Rent = Base Rent × (1 + Rate)^(N−1) | CPI: Year N Rent = Base Rent × (CPI_N / CPI_Base)
CPI escalations are unpredictable — the table below uses an assumed CPI rate for illustration. Many leases cap CPI escalations at 4–5% annually to limit tenant exposure.
| Base Annual Rent | $65,000 ($18.00/sq ft on 5,000 sq ft) |
| Fixed Escalation Rate | 3% per year |
| Assumed CPI Rate | 4% per year |
| Lease Term | 5 years |
Result
Fixed 3%: $101,313 in Year 5 | CPI 4%: $109,474 in Year 5
| Line Item | Value |
|---|---|
| Year 1 | $65,000 |
| Year 2 | $92,700 (fixed) / $93,600 (CPI) |
| Year 3 | $95,481 (fixed) / $97,344 (CPI) |
| Year 4 | $98,345 (fixed) / $101,238 (CPI) |
| Year 5 | $101,313 (fixed) / $105,287 (CPI) |
| 5-Year Total Rent | $477,839 (fixed) / $487,469 (CPI) |
Fixed percentage increase per year
Result
Year 5 Rent: $101,296/year (12.6% increase)
| Line Item | Value |
|---|---|
| Year 1Base rent | $90,000/year |
| Year 2+3.0%/year compounding | $92,700/year |
| Year 3+3.0%/year compounding | $95,481/year |
| Year 4+3.0%/year compounding | $98,345/year |
| Year 5+3.0%/year compounding | $101,296/year |
| Total Rent Over Term5 years | $477,822 |
| Cumulative IncreaseYear 1 to Year 5 | 12.6% |
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Fixed escalations provide certainty — tenants know exactly what rent will be in Year 5. CPI escalations are variable: they protect tenants when inflation is low but can result in higher rent than a fixed rate when inflation is high. Many tenants prefer fixed escalations or CPI with a cap (e.g., CPI not to exceed 3% annually).
The most common fixed escalation rate in US commercial leases is 3% per year, though rates from 2–4% are standard depending on market conditions and lease structure. NNN leases frequently use flat 3% annual bumps. Gross leases sometimes use CPI with a cap.
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