Commercial Lease Escalation Calculator
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Every 5 Years
Lease Summary
Understanding Commercial Lease Escalations
A lease escalation clause is a provision in a commercial real estate lease that allows the landlord to increase the rent at specific intervals during the lease term. This ensures that the property's income keeps pace with inflation and market changes.
Common Types of Escalations
- Fixed Percentage: The rent increases by a set percentage (e.g., 3%) every year or every few years. This is the most predictable type for both tenants and landlords.
- Consumer Price Index (CPI): The increase is tied to an inflation index. While it protects the landlord's purchasing power, it introduces uncertainty for the tenant's budgeting.
- Step Increases: Specific dollar amounts are agreed upon for different periods (e.g., $20/sqft for years 1-3, $22/sqft for years 4-6).
Why Use This Calculator?
Prospective commercial tenants and landlords use this tool to calculate the Total Occupancy Cost over the life of a lease. Knowing the cumulative rent rather than just the year-one base rent is critical for financial modeling and determining if a long-term lease is affordable.
Realistic Calculation Example
If you sign a 5-year lease with a starting annual rent of $60,000 and a 3% annual escalation:
- Year 1: $60,000
- Year 2: $61,800 (3% increase)
- Year 3: $63,654 (3% increase on Year 2)
- Year 4: $65,564
- Year 5: $67,531
- Total Rent Paid: $318,549
| Year | Annual Rent | Monthly Rent |
|---|---|---|
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