2026-10-10 11:40

How does rent indexation work in Germany?

Commercial rent is tied to the consumer price index of the Federal Statistical Office (Destatis) by an indexation clause (Wertsicherungsklausel). An automatic link is permitted only if the landlord is bound for at least 10 years or the tenant may extend the lease to 10 years (§ 3 of the Price Clause Act, PrKG). The wording decides how much inflation reaches the landlord: in food retail, rent usually changes only after a threshold and reflects only part of the index rise.

The law allows automatic indexation only in long-term leases

As a rule, a monetary debt may not be linked directly and automatically to the prices of goods or services that are not comparable (§ 1(1) PrKG). For recurring payments the law makes an exception (§ 3(1) no. 1 PrKG). It applies if the contract runs for at least 10 years, the creditor has waived ordinary termination for 10 years or the debtor may extend the contract to 10 years. The reference must be a consumer price index of Destatis, a state statistical office or Eurostat.

The clause must be sufficiently specific and must not unreasonably disadvantage either party — for example, by raising the rent when prices rise but not lowering it when they fall (§ 2 PrKG). Even an impermissible clause remains effective until a final court judgment establishes the breach, unless the parties agreed that it becomes void earlier (§ 8 PrKG). Residential leases follow a separate regime (§ 557b BGB).

Threshold, pass-through and timing decide what the landlord receives

Exhibit 1. The wording decides: passing on 70%, rent reaches €566,600 by year 10, not €597,500

Element of the clause	Typical version	What it means for the landlord
Index	Destatis consumer price index, base 2020 = 100	Destatis expects to move to base 2025 = 100 in 2028
Threshold	an index rise of 5% or 10% — or of "10 points"	at an index of 125.8 (August 2026), 10 points are only 7.9%
Pass-through share	100% or part of the index rise, for example 70%	at 2% inflation, rent of €500,000 grows to €566,600 by year 10 instead of €597,500
Timing	automatic, or from the month after a written demand	an unnoticed threshold means rent lost for good
Direction	adjustment both ways	a one-way clause unreasonably disadvantages the tenant

In food retail the wording usually comes from the retailer's template (see Part 2 of the series German Prime Retail). In 2023 the specialist fund Habona cited "2/10/70" as an example of a market formula. It means two to three years without indexation from the start of the lease, then an adjustment once the index has risen by at least 10%, passing on 65–75% — 70% on average across the fund. In the Part 11 example, this pass-through turns 2% inflation into rent growth of 1.4% a year. By year 10 the owner receives about €31,000 a year less than under full indexation (our calculation).

The statistical office itself calls point-based thresholds problematic: the index is rebased every five years, so points have to be recalculated. Destatis therefore recommends percentage thresholds or fixed review dates. At inflation of 3.3%, as in September 2026 (Destatis, provisional data), a 10% threshold is reached in under three years; at 2%, in almost five (our calculation).

Indexation must be tracked, or it will not take effect

A threshold passed unnoticed becomes rent lost for good. In our experience, some clauses raise the rent only from the month after the landlord's written demand (Part 10). Destatis publishes the provisional index at the end of the month and the final figure about two weeks later: final data for September 2026 are due on 13 October. The office offers a free calculator for adjusting contracts, but the owner or the owner's property manager must track the threshold and send the tenant a timely demand.

Implications for investors

1. Model indexation on the lease formula, not on inflation. Under the "2/10/70" formula, 2% inflation translates into rent growth of only 1.4% a year, and a 10-point threshold at an index of 125.8 is only 7.9%.

2. Check that the automatic link is lawful. It is permitted only if the lease binds the landlord for at least 10 years — through the fixed term, a waiver of termination or the tenant's options. Otherwise the clause holds only until a final court judgment.

3. Assign someone to watch the threshold. If the clause takes effect on a written demand, check the Destatis index every month and send the demand at once: months missed before the demand cannot be recovered.

What to check:
• whether the landlord's commitment reaches 10 years — through the fixed term, a waiver of termination or the tenant's options;
• which index and base year the clause names, and whether the threshold is set in per cent or in points;
• what share of the index rise is passed on, and whether the clause works both ways;
• whether the adjustment is automatic or requires a written demand — and whether a threshold has already been missed: compare the dates of the last increases with the Destatis index;
• whether the lease provides for earlier invalidity than § 8 PrKG.

Sources: §§ 1, 2, 3, 8 PrKG; § 557b BGB; Destatis: press release No. 348 of 30 September 2026, consumer price index (2020 = 100) as of 10 September 2026, information sheet on point-based threshold clauses (1/2024); Habona Invest, presentation of the Habona Nahversorgungsfonds Deutschland fund of 8 November 2023; the series German Prime Retail, Parts 2, 10 and 11; Gordon Real Estate Group calculations. Legal position as of October 2026.

Photo: Jan-Philipp Thiele / Unsplash

This page is general information and not investment, legal or tax advice.

Ilya Gordon