Rent Escalation Projection
Calculator

It projects how rental income will grow over a holding period by applying an assumed annual growth rate (fixed percentage, or a rate tied to a lease's escalation clause) to the current rent, compounding year over year. It's used to estimate future income for cash flow and return projections.

Historically, rent growth has often tracked close to overall inflation, roughly 2% to 4% annually in stable markets over the long run, though specific markets and time periods can see much higher or lower rates, including outright declines during downturns. Use a conservative, market-specific rate rather than a nationwide average.

Not unless you separately factor it in — a straightforward rent escalation projection generally assumes continuous occupancy at the escalated rate, so realistic income projections should also subtract an assumed vacancy allowance, since turnover periods interrupt the growth curve with zero income.

A fixed percentage escalation compounds smoothly (say, 3% every year), while many commercial leases specify stepped increases at set intervals (for example, a fixed dollar increase every year or every few years) that don't compound the same way. Use the lease's actual escalation clause rather than a general growth assumption when projecting a specific tenant's rent.

Because the growth compounds annually, a seemingly small difference — say 2% versus 4% — produces a substantially larger gap in projected rent after 10 or 20 years, since the higher rate is compounding on an increasingly larger base each year. This makes the growth rate assumption one of the most sensitive inputs in a long-term projection.