What Should You Know about Commercial Lease Escalation Rates?
Commercial real estate contracts typically include detailed lease escalation clauses and rates that outline how and when increases to rent or operating costs will occur (and how both the property owner and the tenant are impacted as a result).
While the presence of lease escalations is very common in commercial agreements, there are many variables to how each escalation will work and what types of rate increases, or reductions will apply. It’s important to understand the different types of lease escalations and know exactly what each will ultimately mean for the profitability of your investment in the short- and long-term because some escalations take place annually, while others are every couple of years or at the beginning of a new lease term.