Rent Escalation Clause Calculator

Escalation clauses drive lease NPV. This calculator compares scenarios.

Base rent $/sf

$/sf

Annual escalation

Lease term years

Sqft

Discount rate

NPV of rent stream

$4,832,086

Year 10 rent $/sf

41.75

Nominal total

$7,336,883

How the math works

NPV compounds escalation yearly and discounts back at required return. Compare 2.5% vs 3% vs 3.5% scenarios.

A 50 bps swing in annual escalation (3% vs 3.5%) on a $32/sf 10-year deal shifts NPV by roughly 4-6%. On a 20,000 sf deal, that's ~$150-250k of NPV — meaningful enough to justify negotiation push on either side.

How to Use

Enter base rent $/sf.
Enter annual escalation %.
Enter lease term years.
Enter sqft.
Enter discount rate %.
Read NPV and year-10 rent.

Frequently Asked Questions

Escalation types?

Fixed steps (2.5-3% most common for office/industrial). CPI (uncapped or capped 3-5%). Market reset at milestone (every 5-10 years). Porter's wage (expense pass through). Each balances predictability vs inflation protection differently.

Landlord preference?

Higher fixed escalators when inflation expected to be moderate. CPI-based when inflation uncertain. Market reset when submarket rising rapidly. Blend sometimes used (e.g., 2.5% floor + CPI, capped at 4%).

Tenant preference?

Lower fixed escalators with predictability. CPI caps to limit upside. Extended base periods before first escalation. Credits/recaptures when expenses drop. Each tenant-friendly feature lowers landlord NPV.