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INSIGHTS

CPI% v 3% fixed increases

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

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