CPI% v Fixed 3%
At The Lease Bureau we see the results of a lot of lease negotiations and lately we’ve noticed a trend towards fixed percentage Rent reviews as opposed to the traditional CPI % review.
So, we did some number crunching to compare the outcome based on the last 10 years figures.
I found the outcome interesting and I’m sure you will as well.
We assumed an initial annual Rent of $30,000 in 2009 and using the March Quarter CPI, here’s how it looks: –
Although it doesn’t look like much of a difference, consider this.
If we assume an 8% Yield, this means that a Property that was worth $375,000 in 2009 has gone up in value in 2019 to: –
$459,662 (using a CPI% Review method)
Or
$503,963 (using a Fixed 3% Review method).
Quite a difference really.
As always if you have any questions, please give me a call.
Regards
Steve Evans