What is the real estate per square foot MSA increase for newark metropolitan area?

I am currently entering a lease with a tenant. The tenant is a school. I am currently in the West Orange area. We have a 5 year lease wtih increases occuring in the 3rd, 4th and 5th year. The tenant is suggesting using CPi which yields 1.5% increase or $23 psf to $23.35 psf. We think this is ridiculous and suggested movement from $23 psf to $25 psf in year 3. They balked at that. Is there some index that we could use that this not the CPI, but some real estate index that I could get others to agree to?
In Leasing Property - Asked by Rupert H. - Aug 7, 2017
Report Abuse
Answer this Question

Answer(s)

Patrick K.
Broker/Agent
The Woodlands, TX

It is not unusual to use CPI as a basis for rent increases. I've never seen another source used. Is this a net or gross lease? Can't suggest an index that's relevant to your area that would contain all of your potential cost components. What will taxes be in year 3 4 or 5? Building maintenance and insurance. If you're quoting a gross lease those expenses obviously come out, what then is your net before or after debt service.
How long has this building been vacant? Project your potential rent increases based on what actual costs should be. Or use a net lease and pass through to tenant.

Aug 8, 2017
Report Abuse
Jim A.
Broker/Agent
West Lawn, PA

well like it or not CPI is realistic and fair...i know of no otter accepted index. I've been both tenant (it's too much!) and landlord ( It's not enough!)
Bets of luck

Aug 9, 2017
Report Abuse
Kathy S.
Broker/Agent
Petaluma, CA

CPI is the index used in real estate. You're probably thinking about financial institutions and LIBOR or similar. Why not agree on a specific percentage, such as 3%? If this is a NNN lease, the CPI makes sense. Otherwise, have the school pay increases in taxes and insurance and operating costs plus the CPI.
We don't know what the CPI will be in year 3, 4 or 5 -- it may be considerably higher.

Aug 10, 2017
Report Abuse
Pam W.
Broker/Agent
Fort Myers, FL

We use no less than a 3% increase in the base rent of the lease.

Aug 10, 2017
Report Abuse

Welcome to Answers

LoopNet Answers is where the commercial real estate community shares what they know to help each other out. And it's all for free.

Ask a question to get advice from brokers, investors, professionals and local experts.

Answer questions to raise your visibility as a trusted advisor and build new relationships.

Ask a Question

Post Question