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Rent escalation and rent bump calculator
Lay out a lease's rent schedule from the starting rent and its increases, either a percentage every year or a step every few years, and see the total and average rent over the remaining term and the yield each year's rent gives on a price. Works in Canadian or US dollars; nothing leaves your browser.
Results
- Total rent over the term
- $4,137,500
- Average rent per year
- $275,833
- Final-year rent
- $302,500
- Equivalent annual growth
- 1.37%
- Yield on price, year 1
- 5.56%
- Yield on price, final year
- 6.72%
- Yield on average rent
- 6.13%
| Year | Rent | Yield |
|---|---|---|
| 1 | $250,000 | 5.56% |
| 2 | $250,000 | 5.56% |
| 3 | $250,000 | 5.56% |
| 4 | $250,000 | 5.56% |
| 5 | $250,000 | 5.56% |
| 6 | $275,000 | 6.11% |
| 7 | $275,000 | 6.11% |
| 8 | $275,000 | 6.11% |
| 9 | $275,000 | 6.11% |
| 10 | $275,000 | 6.11% |
| 11 | $302,500 | 6.72% |
| 12 | $302,500 | 6.72% |
| 13 | $302,500 | 6.72% |
| 14 | $302,500 | 6.72% |
| 15 | $302,500 | 6.72% |
Works in Canadian or US dollars: enter every amount in the same currency. Calculated in your browser; nothing is sent or saved.
How it’s calculated
- Annual increases
Rent in year n = year-1 rent × (1 + increase)^(n − 1) - Step every N years
Rent in year n = year-1 rent × (1 + step)^floor((n − 1) ÷ N) - Yield on price
Year's rent ÷ price × 100 (the cap rate only when the tenant pays every operating cost) - Equivalent annual growth
(final-year rent ÷ year-1 rent)^(1 ÷ (years − 1)) − 1
Worked example (illustrative numbers)
- A single-tenant building has 15 years left on a net lease at $250,000 a year, with a 10% increase every 5 years, and is offered at $4,500,000.
- Rent is $250,000 in years 1–5, $275,000 in years 6–10 and $302,500 in years 11–15: $4,137,500 in total, an average of $275,833 a year.
- The yield on the price is 5.56% in year 1, 6.72% in the last five years and 6.13% on the average rent. Two 10% steps over 15 years are equivalent to about 1.37% growth a year.
- The same starting rent rising 2% every year would total $4,323,354 over 15 years, reaching $329,870 in year 15 (a 7.33% yield on the price).
Illustrative figures for a fictitious lease; they are not market rents, rent increases or cap rates for any tenant, property type or location.
How net lease rent increases are written
Long net leases rarely keep the rent flat. The most common patterns are a fixed percentage every year (for example 2% or 3%), a larger step at set intervals (for example 10% every five years), fixed dollar amounts per square foot at set dates, or increases tied to an inflation index such as the Consumer Price Index, sometimes with a floor and a cap. Renewal options usually carry their own rent, which may be a fixed step, an index adjustment or a fair-market-rent review.
This calculator models the first two patterns. For dollar steps, index-linked increases or option periods, lay out the schedule from the lease itself and show it year by year.
Why the schedule matters to buyers
Two leases with the same starting rent can produce very different income. Annual increases compound and keep pace with costs and inflation more smoothly; a step every five years leaves the rent flat for long stretches and then jumps. Buyers compare the total rent over the remaining term, the average yield on their price and how the rent at expiry compares with what similar space would lease for, because that is the rent they may face at renewal or re-leasing.
Price is usually quoted as a cap rate on the current or next year's rent, so the timing of the next increase matters: a bump a few months after closing adds to the buyer's first-year income, one four years away does not.
Rent, NOI and the cap rate
The yield shown here is rent divided by price. It equals the cap rate only when the tenant pays every operating cost, which is the idea of an absolute net lease. Many leases marketed as triple net still leave the roof, structure, parking lot or management with the landlord; deduct those costs to reach NOI before you quote a cap rate, and say which year's rent the cap rate uses.
Arithmetic only. This is not an appraisal, a valuation opinion, or financial, legal or tax advice. The tenant's covenant, any guarantee, the remaining term, renewal options and the real estate decide what the income is worth, and no calculator captures them.
Showing the rent schedule in an offering memorandum
Give buyers the full schedule from closing to the end of the current term, with each option period shown separately and labelled as an option, and quote the rent per square foot alongside the annual rent. In an OfferingStack offering memorandum, a lease abstract page shows the lease terms and the rent schedule you enter for each tenant, and for a for-sale listing with price and income figures the investment summary page shows the price, NOI, cap rate and weighted average lease term, with calculated values labelled.
Questions
What is a rent escalation clause?
A lease term that raises the rent during the lease, by a fixed percentage, a fixed dollar amount or an index such as the Consumer Price Index, on set dates. In net leases the increases usually apply to the base rent, while the tenant's share of operating costs follows the actual costs.
Are annual increases better than a step every five years?
Neither is better in every case. With the same headline percentage per year, annual increases compound and produce more total rent; a larger step every few years keeps the rent flat between steps. Compare the total rent and the average yield over the remaining term, which this calculator shows for both patterns.
What is equivalent annual growth?
The constant yearly growth that would take the year-1 rent to the final-year rent over the same number of years. A 10% step every five years over 15 years is equivalent to about 1.37% a year.
Is the yield on price the same as the cap rate?
Only if the tenant pays every operating cost. Deduct any costs the landlord carries, such as roof or structural repairs, management or non-recoverable insurance, to reach NOI before you quote a cap rate.
Is my data saved?
No. The calculation runs in your browser and nothing you type is sent to OfferingStack.
Related
Put the numbers in a finished offering memorandum.
Upload your fact sheet or rent roll, add the NOI and price, and review a watermarked preview of the financial and pricing pages before you buy anything.