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We are subleasing a part of commercial real estate (medical office in Brooklyn, NY), and now that 1 year is over, the landlord want to increase the rent by 5%. They claim that their landlord increases their rent by 5% every year and this is normal for commercial RE, "everybody does that".

This does not sound reasonable on the face of it (e.g., inflation is way below 5% ATM), but maybe there is something I don't know.

So, what do I do? Is it really true that cre rent goes up by 5% every year or are they bluffing? Should I expect the same 5% annual increase from all landlords?

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    Purely FWIW, i would say it is not the case that "everybody does that". Such things are very local, though. BTW I've always understood that in your scene, it's hugely advantageous to actually own your premises; of course, that can be a challenge.
    – Fattie
    Feb 26, 2018 at 20:24
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    One thing that every landlord does do, is negotiate the highest rate they can. You make it look like you're ready to walk, and it may or may not still be +5%.
    – user662852
    Feb 26, 2018 at 21:02
  • @user662852: I am afraid I don't understand what you are saying.
    – sds
    Feb 26, 2018 at 21:03
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    @sds It doesn't make any difference whether other people do it or not. If you're willing to pay 5% more each year, then your landlord is willing to take that. if you're not willing to pay 5% more each year, then your landlord will make a decision whether or not to accept less. Feb 26, 2018 at 21:05
  • @DavidSchwartz: it does make a difference! The question is: will every landlord ask for 5% per year?
    – sds
    Feb 26, 2018 at 21:37

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I don't live in New York so I don't claim to know much about the New York real estate market. But 5% per year every year sounds ... very unlikely.

According to this source, http://www.millersamuel.com/files/2012/10/DE100yearsNYC.pdf, rents roughly doubled from 1980 to 2010, which comes to an average annual increase of about 2.4%. That seems like a plausible number to me.

The real thing is: can you get a better deal elsewhere? If your rent is presently 10% below average, a 5% increase is unpleasant but still leaves you with a good deal. If your rent is already above average and shows every sign of increasing rapidly, maybe it's time to shop for alternatives.

In any case, what else would you expect your landlord to say? I can't imagine the landlord saying, "Yes, we're jacking rates up way faster than all our competitors, and we know we can get away with it because our tenants are gullible idiots." Of course he's going to say this is normal. I'd shop around and see if he's telling you the truth or not.

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  • LOL great final paragraph :)
    – Fattie
    Feb 27, 2018 at 11:23

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