Rent escalation clauses are a common part of commercial property
leases. One popular method for calculating the escalation amount
bases the rent increases on changes in the Consumer Price Index
(CPI). However, the CPI approach is not as straightforward as it
might seem.
CPI in a Nutshell
The CPI is a measure of the average change over time in the
prices paid by urban consumers for a "market basket" of
consumer goods and services. The market basket is developed from
detailed spending information provided by families and individuals.
Spending items are classified into more than 200 categories
arranged into eight major groups, including food and beverages,
housing, apparel and transportation.
