Two companies sign leases for practically identical premises in the same industrial park — a 1,500 m² warehouse with a 200 m² office. Five years later, one has paid €107,192 more than the other. Not because the space was better, but because the other tenant negotiated two things before signing: the base rate and the indexation terms.
The offer that looks perfectly normal
A typical offer in an A/B-class park around Riga:
- Warehouse: 1,500 m² × €5.40/m² per month
- Office: 200 m² × €9.00/m² per month
- Total: €9,900 per month (net rent, excluding service charges and utilities)
- Term: 5 years
And in the lease text — one sentence most tenants skim past:
"The rent shall be increased annually in line with the consumer price index, but by no less than 3%."
That sentence looks harmless. It is not.
Floor and ceiling — and what they actually did
Indexation is the annual adjustment of rent in line with inflation, usually the national CPI (Latvian CSB) or the eurozone MUICP. In itself it is normal practice. The risk hides in two parameters:
- Floor (minimum) — the smallest increase applied every year, even if inflation is lower or negative. "No less than 3%" means your rent grows at least 3%, whatever happens in the economy.
- Ceiling (cap) — the largest increase that may be applied. Without a cap, an inflation spike passes through to your rent in full.
A standard landlord-drafted lease has a floor and no cap. All inflation risk sits with the tenant, while the landlord is guaranteed growth even in deflation. That asymmetry can only be fixed before signing.
Recent years show this is not a theoretical risk:
| Year | Latvian inflation |
|---|---|
| 2021 | 3.3% |
| 2022 | 17.3% |
| 2023 | 9.1% |
| 2024 | 1.3% |
A tenant who signed an uncapped lease got the letter the year after inflation hit 17.3%: rent +17.3%. In a single year, with no negotiation — all strictly according to the contract they signed themselves. And the other way round: in the year inflation was 1.3%, leases with a 3% floor still went up by 3%.
Test it yourself
The simulator compares both scenarios for the same premises: the initial offer with a 3% floor and no ceiling, against a negotiated lease with a 5% discount, a 3% ceiling and no floor. Switch tabs, or enter your own numbers.
The three levers to negotiate
1. The base rate
A 5% discount sounds modest — €495 per month. But indexation compounds from the base: the lower the base, the smaller every subsequent increase in euro terms. Over five years that discount alone is worth more than €35,000. Vacant space costs the landlord money every month — a well-argued discount request paired with a willingness to sign long-term is a perfectly normal negotiating position.
2. The indexation ceiling
A ceiling is the tenant's insurance against inflation spikes. In year 3 of our scenario the uncapped lease grew by 17.3%, the capped one by 3%. The gap in that single year: €24,218. It never goes away, because every increase becomes the base for the next one.
3. The floor — and what to ask for in return
Landlords justify the floor with their financing: bank loans require predictable cash flow. Fair enough. But then the fair compromise is symmetry — if there is a floor, there is also a ceiling. A "2% to 4%" collar gives both sides predictability. A one-sided floor without a cap gives it to one side only.
Year by year
Compared using actual Latvian inflation for 2021–2024 (in the simulator: "Real Latvia 2021–2024"):
| Year | Offer | Negotiated | Difference |
|---|---|---|---|
| Year 1 | €118,800 | €112,860 | €5,940 |
| Year 2 | €122,720 | €116,246 | €6,475 |
| Year 3 | €143,951 | €119,733 | €24,218 |
| Year 4 | €157,051 | €123,325 | €33,725 |
| Year 5 | €161,762 | €124,928 | €36,834 |
| Total | €704,284 | €597,093 | €107,192 |
In year 1 the gap is purely the discount. From year 3 onwards the indexation terms do most of the work — and the gap never shrinks again.
Before you sign
- Request the indexation formula in writing: which index (national CPI or eurozone MUICP), which reference period, from which date.
- Ask for a ceiling. If the landlord insists on a floor, ask for a collar: a floor only together with a ceiling.
- Agree that the first indexation applies no earlier than year 2 of the lease.
- Check whether the service charge has its own, more aggressive indexation clause — it frequently hides in a different section of the contract.
- Compare 5-year total costs, not year-1 rates. A low headline rate with aggressive indexation can cost more than a higher rate with fair terms.
For the other clauses worth negotiating before you sign: 7 clauses you must negotiate before signing a warehouse lease.
This article is educational material, not legal advice — have a lawyer review the specific wording before you sign.