Keeping our clients informed is important to us so we regularly publish our thoughts on topics that will be of interest to anyone involved with commercial property. We call them ‘insights’ and we hope you find them of interest.
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)
$503,963 (using a Fixed 3% Review method).
Quite a difference really.
As always if you have any questions, please give me a call.