Net lease glossary
Rent Bumps (Rent Escalations)
Scheduled increases in base rent, either as fixed percentages, fixed dollar amounts, or tied to inflation, during the lease term or options.
Rent bumps are contractual increases in base rent. Common structures include annual increases of a fixed percentage, step-ups every five years, or adjustments tied to the Consumer Price Index, sometimes with a floor and cap. Bumps protect the landlord's income against inflation and drive total return beyond the going-in cap rate. A flat lease with no increases usually prices at a higher cap rate than an otherwise identical lease with regular bumps.