Forecasting the True Cost of a Lease: Rent Escalation Modeling for Breweries
Rent that increases at a compounding rate can quietly add thousands of dollars to your total out-of-pocket cost over the course of a lease. That’s why it’s critical to forecast how your rent will grow when evaluating lease options. Here’s the quick math: take your escalation rate (say, 2%), and add 1 (so…1.02). Then, multiply your current rent by that number for each year of the lease. That the simple way to calculate basic compounding.
Don’t forget to factor in triple-net (NNN) charges - those might increase even faster than rent. To really get a feel for how each lease stacks up, chart your options side by side. Or take the easy route and use the rent escalation tool in the Lease & Occupancy Cost Analyzer.
Lease & Occupancy Cost Analyzer
Why a 2% escalation in your brewery lease isn’t as harmless as it sounds
A 2% annual rent increase might sound like nothing. It seems manageable. Barely noticeable, in fact. But when it comes to compounding, even small increases add up fast.
Take a $6,000 per month base rent. With a 2% annual increase:
Year 2 = $6,120 per month
Year 3 = $6,242 per month
Year 4 = $6,367 per month
Year 5 = $6,495 per month
That’s over $500 more per month by year five - an 8.2% increase overall. And if you’re paying $12,000 or $15,000 per month? The hit to your bottom line gets even bigger.
Now layer on NNN charges (taxes, insurance, maintenance), which often increase 3 to 5% annually. Suddenly, your total occupancy cost might rise 15–25% over the life of your lease - without any added square footage or upgrades.
If your brewery runs on tight margins - especially in distribution-heavy models - this can sneak up fast. Escalators are normal, but blindly accepting them without modeling the long-term impact? That’s where operators get burned.
Always take your lease to its logical conclusion. What will you be paying in year five? Year ten? That’s how you understand your true financial exposure.
How to build a 5-year brewery lease cost forecast
Before you sign a lease, or renew one, it’s worth spending an hour to model what it’ll cost you over the years,. These forecasts help you understand cost creep, make smarter comparisons, and avoid being surprised by sneaky increases.
Here’s how to do it:
Start with the basics: Base rent, escalation %, lease start date
Example: $6,000 per month base rent, 3% annual escalation, starting July 1, 2025
Apply the compounding formula:
Year # Rent = Base Rent × (1 + escalation rate)^(# - 1)
So:
Year 1 rent = $6,000 × 12 = $72,000 per year
Year 2 rent = $6,000 × 1.03^1 = $6,180 per month ($74,160 per year)
Year 3 rent = $6,000 × 1.03^2 = $6,365 per month ($76,385 per year)
And so on…
Don’t stress over partial years unless you're being very precise - just note if you’re starting mid-year.
Now project your NNN charges:
If NNN = $18,000 in Year 1 and you assume 2% growth, then Year 2 = $18,360
Add base rent + NNN each year to get your total occupancy cost.
Lay it all out: In a spreadsheet or even on paper. Line up all five years of projected rent and NNN to see how the numbers change.
This year-by-year view is far more useful than comparing only Year 1 rent across properties. It helps you spot deals that look cheap upfront but grow too fast - and vice versa.
And if the math feels like a drag, use the Lease & Occupancy Cost Analyzer (above) to run it all for you.
How to compare lease options for your brewery across time, not just today
A common mistake in leasing (in any industry, not just craft brewing) is focusing too much on Year 1 rent. But unless you’re planning to move every 12 months (you’re probably not), you’ll likely be stuck in that lease for 5, maybe even 10 years.
So the rent that looks cheap today? It might turn into a financial anchor later.
To avoid that trap:
Chart total occupancy cost over time for each lease
Use a line or bar chart to visualize how rent + NNN evolve annually
Add in qualitative factors like buyout clauses, renewal terms, or subletting flexibility
This makes trade-offs obvious. You might find one option has higher upfront costs but grows slowly - while another starts cheap but climbs fast.
Then add up the cumulative total over five years. That shows your real financial commitment:
$95,000 per year lease with 5% escalator = $531,000 over 5 years
$100,000 per year lease with 2% escalator = $520,500
A savings of over $10k, even though the second lease starts higher.
If spreadsheets aren’t your thing, you can delegate:
In-house: 2–3 hours for someone with decent Excel skills
External help: $150–$500 depending on depth
Or ask your CPA, bookkeeper, or fractional CFO to help run the numbers
This is how you protect profitability - not just today, but in years 3, 4, 5, and beyond.
Look beyond year 1 of your lease for real leverage
Don’t get lulled into a false sense of security by a lease that looks good on paper today. That’s how bad deals hide. You’re building a business for the long haul, and you want a lease that holds up - not just one that looks good for the first 12 months.
Red flags like escalation creep and unchecked NNN charges can quietly turn a decent lease into a drag on your entire operation. But when you model it out - line by line, year by year - you see the full picture.
Even better, when it’s time to negotiate, having a clear visual of your total lease cost gives you real leverage. You can sit down with a landlord and say, “Here’s what this deal looks like for me five years out.”
That puts you in a position of strength. Not because you’re a spreadsheet wizard, but because you were willing to think further ahead than just Year 1. And that’s a habit that pays off far beyond leasing decisions.
