Rent Escalation Calculator
Year N Rent = Starting Rent × (1 + escalation)^(N−1)
What escalations really cost
Almost every commercial lease escalates. A 3% annual bump sounds modest in year one and compounds into something substantial by year ten. This calculator shows the rent in each year, the total across the term, and the average.
Worked example
$117,000 starting annual rent escalating 3% a year over 5 years:
- Year 1: $117,000
- Year 3: $124,125.30
- Year 5: $131,684.53
- Total over the term: $621,168.89
- Average annual rent: $124,233.78
The average is the number to compare between competing deals — not the year-one rate a landlord leads with.
Why the average matters
A space at $18.00/SF escalating 4% and a space at $19.00/SF escalating 2% will cross over. Over a ten-year term the “cheaper” space is more expensive. Comparing headline rates alone gets this wrong routinely.
Forms escalations take
- Fixed percentage — what this calculator models. Predictable for both sides.
- Fixed dollar — a set increase per SF, which is a declining percentage over time.
- CPI-linked — tracks inflation; frequently collared with a floor and ceiling.
- Stepped — larger increases at set intervals rather than annually.
Landlords should note that escalations feed directly into NOI, and therefore into value at any given cap rate.