Suppose a lease has a 50% CPI-Adjustment each year

Finance Dec 19, 2020

Suppose a lease has a 50% CPI-Adjustment each year. If last year's rent was $20/SF and the CPI has increased from 155 to 161, what is the new rent this year?

Expert Solution

$20.39 / sq foot

In order to calculate a change in rent using the CPI, we need to determine what was the percentage change in the CPI. This can be found using the equation:

(161 - 155) / 155 = 0.0387097

So the CPI increased by 3.87097%. Rent is indexed to 50% of the CPI, so half of that change is 1.935484%

20/ sq foot * 0.01935484 = 0.3870968

Rounded to the nearest cent, that gives us a rent increase of $0.39 per square foot, for a total new rent of $20.39 / sq foot

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