What does an increase in rental rates in an index lease depend on?

An increase in rental rates in an index lease is fundamentally tied to the selected index of economic conditions. An index lease typically ties rent adjustments to a specific economic indicator, such as the Consumer Price Index (CPI) or other statistical measures that reflect economic trends. When the designated index rises, it signals inflationary pressures or increased costs of living, which can justify an increase in rental rates to maintain purchasing power for the landlord. The specific index used dictates how adjustments are calculated, providing a structured and predictable method for adjusting rent over the lease term.

While negotiations between landlord and tenant, overall market demand, and the timing of the lease signing can all influence rental rates, they do not specifically govern how the rental increase is determined in the context of an index lease. Therefore, the chosen index of economic conditions is the direct link for determining increases in rental rates under this lease type.