Commercial CPI Rent Reviews

July 14, 2025

If you’re here, you’re probably wondering:

“What is a CPI rent review?”

Or more accurately…

“Is it working for me or against me?”

Whether you're a landlord, tenant, investor or managing a portfolio, Commercial CPI Rent Reviews are one of the most misunderstood (and most important) clauses in your lease agreement.

This page is your no-BS breakdown.

We'll cover:

What CPI rent reviews are (and what they're not)
How they're calculated (step-by-step)
The pros, cons and common traps
How they compare to other rent review methods
What to do if CPI inflation goes sky-high
What ever smart property owner should be doing right now

Let’s break it down in plain English.

What Is a CPI Rent Review?

A CPI (Consumer Price Index) rent review is a mechanism built into a commercial lease agreement that allows the rent to be adjusted based on inflation.

In simple terms:

If the cost of living goes up, so does the rent.

It’s a way to ensure that rental income keeps pace with rising expenses over time.

The CPI figure is set by the ABS (Australian Bureau of Statistics) and reflects changes in the cost of a standard basket of goods and services (housing, fuel, food, transport, etc.). It’s calculated quarterly and applied as a percentage.

In your lease, this clause might read something like:

"The Rent shall be increased annually in line with the CPI (All Groups - Brisbane) as published by the ABS for the quarter ending prior to the review date."

How Are CPI Rent Reviews Calculated?

This is where most people get tripped up but it’s actually dead simple once you know the formula.

Let’s say:

Your current annual rent is $100,000
Your base CPI Index (base rent) = 117.1
Current CPI Index (review date) = 124.2

Formula:

(Current Index - Base Index) / Base Index × 100 = % Increase

So:

(124.2 - 117.1) / 117.1 × 100 = 6.05% increase

Your new rent would be:

$100,000 × 1.0605 = $106,050

Done. No arguments. No debates. Just straight-up maths.

PRO TIP: Always double-check which CPI Index your lease references:

Is it national or capital city-specific?
Is it quarterly or yearly?
Is it tied to a specific publication date?

Because if you get this wrong, you're either undercharging or overpaying.

CPI Reviews vs Market vs Fixed % - What’s the Difference?

Let’s cut through the jargon and look at the 3 big types of rent reviews:

CPI Rent Review(Consumer Price Index)

Tied to inflation
Calculated quarterly by ABS
Follows economic movement

Pros:

Transparent and objective
Reduces tenant disputes
Aligns with cost of living

Cons:

Unpredictable in volatile inflation periods
Can underperform market growth

Fixed Percentage Review

Rent increases by a pre-agreed % each year (e.g. 3%, 4%, 5%)

Pros:

Simple and predictable
Easy to forecast

Cons:

May lag behind inflation or market growth
Tenants may resist high fixed % in slow markets

Market Rent Review

Rent is reviewed against comparable properties in the area

Pros:

Allows you to capture market growth
Reset rent to fair market value

Cons:

Subjective and dispute-prone
Requires valuers, lawyers and negotiation
Tenants often challenge the result

So, When Should You Use CPI Rent Reviews?

Here’s when CPI-linked rent increases make the most sense:

You're leasing long-term (3+ years) and want inflation-aligned growth
You want low-dispute, predictable rent increases
You manage a commercial or industrial asset with stable tenant profiles
You want to protect your net income in a rising cost environment
You need a win-win model that both landlords and tenants can accept

And here’s when it might not be the best fit:

You're in a booming market and want to maximise rental growth
You're leasing short-term and want maximum flexibility
You need absolute rent certainty (then fixed % is better)

What Happens When CPI Goes Through the Roof?

In 2022-2023, we saw CPI spike well above 7% in some cities.

Landlords cheered. Tenants panicked.

Here’s the smart move in volatile inflation markets:

Use a collar clause - a clause that sets a minimum and maximum range for CPI increases (e.g. min 2%, max 5%)
Ensure the lease defines which CPI index and what quarter clearly
Combine CPI with a market review for every 3-5 years for a balanced approach

Real Case: The Forgotten CPI Clause That Cost $18,000

I had a client who had a CPI review clause built into their lease but for 3 years, they didn’t apply the increase.

The tenant happily kept paying $140,000/year.

By the time we took over the management, CPI had risen a combined 12.9%.

That’s $18,060 in unrealised rent. Gone.

Why?

Because no one was keeping an eye on the lease.

No review notices were sent. No indexation was calculated.

The clause was there but unused.

Moral of the story?

Set a reminder. Get a manager. And don’t sleep on CPI clauses.

What to Check in Your Lease (CPI Clause Checklist)

Before the next rent review hits, make sure your lease answers:

Which CPI Index is referenced? (Brisbane, Perth, National, etc.)
What publication quarter is used for review?
Is there a collar clause (minimum/maximum adjustment)?
What is the review date each year?
How will the CPI change be calculated and communicated?
Is there any ratchet clause (that stops rent from falling)?

If these aren’t nailed down in writing, you’re one step away from confusion, disputes or straight-up financial loss.

What About Retail Leases?

Retail shop leases in QLD fall under the Retail Shop Leases Act 1994, which has specific requirements:

CPI reviews are allowed, but dual-method reviews are not (e.g. CPI OR market - pick one)
Ratchet clauses (where rent can't decrease) are prohibited
Disputes about CPI calculations can go to QCAT
If no agreement is reached, a specialist retail valuer maybe appointed

Moral of the story: retail leases are a different beast.

If you manage a retail property, you must understand the Act or work with someone who does.

So, What Should You Do Next?

If you’re:

Unsure whether your CPI clause is being applied correctly
Want to update or renegotiate your lease structure
Looking for a smarter way to protect rent without overcharging tenants
Managing multiple properties and need consistency across leases

Then it’s time to bring in an expert.