I represent 3 separate ownerships for 16 commercial property for lease buildings, which we manage & have over 75 tenants and we have never increased the security deposit on a renewal. Instead we charge 1.2x the first months rent for security deposit upfront. Three major factors are considered: 1.) The 1.2x helps to cover future increases in rent and is a ratio that we have figured that works pretty well. 2.) Yes, labor costs do typically increase over time, but you also have to figure in normal wear n tear, which the vacating tenant will not be held responsible for (tenants will typically win this battle in court). & 3.) It is even more difficult to get an existing tenant to renew when you're typically asking them to pay more rent and also throw in there to put up more money towards a security deposit that they have already put into.
May 1, 2012