Annual rent increases vs inflation

[Tal Mashhadian]

Hi All

So far our standard lease includes a 3.5% annual rent increase for our 4 unit retail commercial building. This has worked great, but with inflation going up is this a good idea for new lease? A tenant is asking for a 10 year lease and will be taking 75% of the building.  

We like the 10 year but worry that our standard increase will be too small. 

Thanks!

[John M.]

I think 3.5% is just fine especially since it's NNN. I rarely see anything above 3% a year so your already ahead of the game. The tenant is already going to get hammered with increased insurance, maintenance, and taxes so be careful with getting too greedy on the bumps.