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Article: CPI escalations: the evolution of an index.(Insiders Outlook)(Consumer price index)
- Article from:
- Real Estate Weekly
- Article date:
- June 2, 2004
- Author:
CopyrightCOPYRIGHT 2004 Hagedorn Publication. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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Consumer price indexed rental rate escalations became popular in the early 80's out of necessity.
During the Jimmy Carter administration the inflation rate rocketed resulting in the purchasing power of a dollar dropping.
Normal, market-based rental rate step-ups common in most leases at that time generally failed to provide an actual constant dollar value increase over the term of a lease.
Many property owners suffered actual inflation adjusted dollar value decreases in cash flow.
Quickly, the CPI index increase became an accepted part of most leasing transactions.
Typically, tenants resisted the addition of this clause to ...