Cost of living rate for commercial real estate

Asked about 2 years ago - Poway, CA

what is the average cost of living increase for commercial rentals in the san diego ca area

Attorney answers (2)

  1. Shaun K. Boss

    Contributor Level 14

    2

    Lawyers agree

    Answered . Generally the rent adjusts according to the cost of living index. Sometimes the lease will also place a "floor" and a "ceiling" on the amount the rent can change (ie. 2% floor 5% ceiling).

  2. Michelle A. Perfili

    Contributor Level 13

    Answered . Commercial leases (even in good economic times) are generally highly negotiable and in the cirrent economy, many a good deal can be struck. I believe you are referring to a rent structure with an escalation tied to the "Consumer Price Index"(CPI). The concept is rather confusing and I have added a link for your general information. Essentially, rent increases tied to a change in the CPI set an adjustment period where the CPI change will be increased by the percentage of change for the relevent period (and the relevent "index"). You should take care to read the clause carefully as there are different "indices" that may be specified. Therefore I would say there is not an average "increase" you should expect, since the CPI in simplest terms compares the cost of a "basket of specified consumer goods" at one time versus the cost at a point in the future (the "inflated cost of goods") and which yields a percentage of change that can be assigned to rents, goods or whatever in your particular lease or contract.

    Many rental adjustment clauses provide that rents can be adjusted upward but not downward based on the CPI. Lease negotiation can be a creative process and you may be able to agree to a specific base rental increase or perhaps negotiate other "rents" such as percentage rents in lieu of an escalation to the base rent.

    A long term lease commitment can be a costly venture so it may behoove you to speak to an experienced real estate attorney to avoid any surprises in the long run if you do not understand any of the lease provisions.

    Good luck.

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