Home – New Forums Starting your journey CPI vs Fixed increase

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    Sam Mehra
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    Hi Guys

    We are considering to start up a cafe in a shopping strip and negotiating the terms of lease with the landlord. What we are considering is a 5+optional 5 lease

    What I would like to discuss here and get your feedback is the annual increase in rent. The landlord has asked for a 4% – 5% increase per year – in our reply we advised that we can offer 3%. I should mention that that the landlord is putting in a new grease trap (he was doing that anyway) we have asked for 3 months rent free + 2 months half rent ( landlord’s decision still pending ) and outgoings are included except water (agreed)

    So it sounds like a pretty decent lease but i’m not so sure about the annual increase of 3% that i proposed – i still haven’t signed anything so I thought i’d post it here and get your opinion on it. Should I push for a CPI increase rather than fixed increase? Read an online article by a commercial real estate agent who recommended fixed increase so that tenants know exactly what they’r up against.

    Should I re offer a lower fixed such as 2% or 2.5% ? or is 3% a reasonable increase? Only in hindsight i realised that how even a 3% compound interest adds up so significantly!

    Also, with market review at the end of 5 yrs as per my real estate agents advise I have asked for a max increase of 5% if we decide to carry on – what do you guys think about that ?

    Thanking You!
    Sam

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