Language for commercial rental rate adjustments due to inflation
I have a mixed use project which will be ready for occupancy in 2024. We are starting to prepare LOI’s for commercial tenants. For a ten year lease in an uncertain inflationary period, what’s the best way to approach this that’s fair to both sides?

In the past I’ve written in something like:  “rent for the base year will be $XX per square foot.  Starting in January of year X, the base rent will increase annually by the greater of 2% or the annual rate of increase in the CPI-U Northeast as published by the Bureau of Labor Statistics.”  

Anyone have a better system?

Thanks!
[{"id": "icz2n0r", "text": "That's a good start for a LOI.", "replies": [], "depth": 1}, {"id": "icz95au", "text": "Greater of 3% or CPI not to exceed \"XX percentage\"", "replies": [], "depth": 1}, {"id": "iczbqg7", "text": "Instead of starting in January, wouldn't you want to calc on the lease/rent anniversary date? (i.e. Apr T-1 to Mar T0 if anniversary is Apr)\n\nAs for a CPI cap, I'd leave it out until TT comes back to for it.", "replies": [], "depth": 1}, {"id": "iczcc0u", "text": "I prefer straight across increases (3-5%) rather than using CPI because CPI isn't used for appraisals and because both tenant and landlord know what they are looking at. \n\nOne of the property owners we represent is now saying CPI with a min of 3% and a max of 5% whichever is greater.", "replies": [], "depth": 1}, {"id": "id10483", "text": "what does your security look like?", "replies": [], "depth": 1}, {"id": "ifzt6ps", "text": "I pulled the following directly from a commercial lease I have. You would probably have to make some changes based on your lease structure, but I use this CPI-W based escalation clause for commercial leases and long-term operational contracts. \n\n3.1\tBase Rent. Commencing with the Commencement Date and continuing throughout the Initial Term and any Extension Term of this Lease, Tenant covenants and agrees to pay to Landlord monthly Base Rent of *amount*  Each payment of Base Rent is payable in advance on or before the first (1st) day of each and every calendar month during the Term.  Beginning with the Commencement Date, throughout the Initial Term of this Lease and any Extension Term, the Base Rent set forth above is subject to adjustment each Lease Year of the Lease beginning on the first day of the second Lease Year and each Lease Year thereafter (each, an \u201cadjustment date\u201d) as follows:\n(a)\tThe base for computing the adjustment is the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), All Items, Unadjusted (Middle Atlantic Region) 1982-84=100 issued by the Bureau of Labor Statistics of the United Stated Department of Labor (\u201cPrice Index\u201d), which is published for the month nearest the Commencement Date (\u201cBeginning Index\u201d).  If the Price Index published nearest the applicable adjustment date (\u201cExtension Index\u201d) has increased over the Beginning Index, the Base Rent until the next adjustment date shall be set by multiplying the Base Rent set forth above by a fraction, the numerator of which is the Extension Index and the denominator of which is the Beginning Index.  In no case shall the adjusted Base Rent be less than the Base Rent for the prior Lease Year.  \n(b)\tIf the Price Index is changed so that a base year differs from that used as of the month immediately preceding the month in which the Commencement Date occurs, the Index shall be converted in accordance with the conversion factor published by the United States Department of Labor, Bureau of Labor Statistics.  If the Price Index is discontinued or revised during the Term of the Lease, such other government index or computation with which it is replaced shall be used in order to obtain substantially the same result as would be obtained if the Price Index had not been discontinued or revised.", "replies": [], "depth": 1}]