The rent that never grows is the risk nobody feels

Flat rent, quiet erosion

This one doesn't blow up. It just quietly underperforms for fifteen years, which is almost worse, because nobody notices until they go to sell.

Long lease, strong tenant, everybody happy. But the rent was flat. No bumps, not even a small one, for the whole term. Year one it looked like market. Year ten, with everything else in the world more expensive, that same rent was worth a lot less, and the building had quietly become the least valuable version of itself.

When it came time to sell, the buyer's analyst did the same math and paid for it accordingly.

What to take from it

Escalations aren't a nice-to-have. They're your inflation insurance and a big piece of your resale value. A flat lease and a bumping lease can look identical on day one and be worth very different numbers by the time you sell.

▶Try this scenario in the analyzerLoads this deal so you can watch the model flag it, then change any number to run your own.

Lease Structure Cap Rates

Set the escalation to 2% and see what fifteen years of protection is worth →

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