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UK Commercial Property Upwards-Only Rent Review Ban: A Deep Analysis

Executive Summary

The UK Government has proposed a surprising and significant reform to commercial property leasing through the English Devolution and Community Empowerment Bill, published on 10 July 2025. This legislation would ban upwards-only rent review clauses in all new commercial leases in England and Wales, fundamentally altering the commercial property landscape. The proposal has emerged without prior consultation, catching the industry off-guard and raising substantial concerns about its potential impact on property values, investment flows, and lending decisions.

Average Lease Lengths in UK Commercial Property

The UK commercial property market has experienced significant changes in lease structures over recent years. Current data reveals a complex picture of evolving lease terms:

Office Sector: Average lease lengths have undergone dramatic changes, particularly post-pandemic. The average office lease length dropped by 34% from 52 months in Q1 2019 to 34 months in Q1 2023. However, recent data shows a reversal of this trend, with office lease lengths increasing by 27% from 2.9 years in Q1 2023 to 3.7 years in Q1 2024[1].

Retail Sector: Retail lease lengths have shown similar volatility, with the average increasing by 32% from 37 months in Q1 2023 to 49 months in Q1 2024[1]. This represents a 44% rebound from the lows of 2021.

Industrial Sector: Industrial leases have remained more stable, maintaining an average of 52 months for the third consecutive year in Q1 2024[2].

Overall Market: The general consensus indicates that UK commercial leases now commonly range from 3 to 25 years, with most falling between 3-5 years for shorter-term arrangements[3]. Traditional long-term leases of 15-25 years are becoming increasingly rare, with only 1.5% of all leases now lasting more than 10 years[4].

Proportion of Commercial Leases with Rent Review Provisions

The proportion of commercial leases containing rent review provisions varies significantly based on lease length and property type:

Length-Based Analysis: In the UK, commercial leases with durations over 5 years very likely contain rent review clauses to open market rent. Most rent reviews occur at 5 year intervals, making them standard in medium to long-term leases.

Market Distribution: According to the Property Industry Alliance’s Property Data Report 2023, 50.4% of leases are for 5 years or less, 32.3% for 6-10 years, 12.7% for 11-20 years, and only 4.5% for 21+ years. This suggests that approximately 49.6% of leases are long enough to typically include rent review provisions.

Property Type Variations: There is little difference between sector types in terms of rent review inclusion, with office, retail, restaurant, and industrial leases all commonly featuring these clauses[5]. However, the frequency of reviews may differ, with prime assets typically requiring more frequent assessments than secondary properties.

Prime vs. Secondary Markets

Prime assets typically command rent reviews every five years with significant increases compared to secondary assets[5]. The timing and frequency of reviews often correlate with asset quality and maintenance requirements.

Impact of Upwards-Only Clauses on Property Values

Upwards-only rent review clauses have been fundamental to UK commercial property valuation for decades, providing several key benefits:

Investment Security: These clauses sustain capital values and hence investment in property by providing guaranteed minimum income streams. They allow commercial property to be bought and sold like a bond with predictable returns.

Valuation Underpinning: UORRs are described as underpinning the attractions of property as a long-term investment class and are a cornerstone of the commercial property investment market. They reduce uncertainty for investors, developers, and landlords.

Market Differentiation: The removal of UORRs is expected to create greater variability in rental income streams which may affect property valuations and business models, particularly for assets where long-term income is a key investment driver. This could push up yields on assets with greater income uncertainty.

Potential Impact: Capital Economics suggests that the ban would nudge commercial property yields up, indicating a negative impact on property values. There are concerns about a two-tier investment market emerging, with pre-commencement leases commanding premiums.

Impact on Lending and Financing Decisions

The relationship between upwards-only rent reviews and commercial property lending is particularly significant:

Loan-to-Value Ratios: While standard commercial property LTVs range up to 90% in favorable circumstances[6], the predictability of rental income through UORRs has been crucial for lenders’ risk assessment models.

Debt Service Coverage: The removal of UORRs introduces risk of downward rent adjustments at review which could impact debt service coverage ratios and alter loan-to-value calculations and requirements. Lenders may need to reassess risk models and loan covenants as the predictability of the minimum rental level diminishes.

Investment Flows: There are concerns that the ban could deter some institutional and overseas investors who prioritise stable, upward-only income. This could impact inward investment and liquidity in the UK commercial property market.

Historical Precedent: Ireland’s experience in 2010 provides some insight – while there was initial market concern about reduced investment attractiveness, investment volumes were not fundamentally altered in the long term after an initial period of volatility.

Potential Impacts on Future Rents and Market Behaviour Changes

The ban on upwards-only rent reviews is likely to create several significant changes in rental structures and risk allocation:

Rental Structure Adaptations: Landlords may respond by:

  • Pricing in potential downward risk through higher initial rents
  • Increasing use of fixed stepped rents or index-linked reviews
  • Implementing more sophisticated review clause provisions, e.g. rent reviews that are not based on open market rents but linked to cumulative inflation over the period

Risk Reallocation: The ban fundamentally shifts risk from tenants to landlords:

  • Landlords will bear the risk of market downturns and declining rents
  • This may lead to more conservative lending practices and higher borrowing costs
  • Tenants may face higher initial rents to compensate for landlords’ increased risk exposure
  • The overall cost of commercial property occupation may not decrease significantly if initial rents rise to account for the removal of upwards-only protection

Market Behavior Changes: The legislation includes robust anti-avoidance provisions, giving tenants the right to trigger rent reviews even when landlords might prefer to avoid them. This ensures that the market cannot simply avoid the intended effects through strategic behavior.

Conclusion

The proposed ban on upwards-only rent review clauses represents one of the most significant changes to UK commercial property leasing in decades. While aimed at supporting high street businesses and economic growth, the measure will likely have far-reaching consequences across the entire commercial property sector. The experience suggests that while markets can adapt to such changes, there will be a period of adjustment with potential impacts on property values, investment flows and lending practices. The ultimate effectiveness of the measure in achieving its stated goals remains to be tested, particularly given that many of the high street businesses it aims to help often operate on shorter leases that may not include rent review provisions in the first place.

References and Further Reading Materials

Official Government Sources

  1. English Devolution and Community Empowerment Bill (2025) – The primary legislation introducing the ban on upwards-only rent reviews
  2. UK Government Impact Assessment – Ministry of Housing, Communities and Local Government (RPC-MHCLG-25051-IA, June 2025)
  3. UK Government Guidance – English Devolution and Community Empowerment Bill Guidance (July 2025)

Legal and Professional Commentary

  1. A&O Shearman – “Ban on upwards only rent reviews—a major shake-up for commercial real estate?” (July 2025)
  2. Baker McKenzie – “United Kingdom: Are upwards-only rent reviews going down?” (July 2025)
  3. BCLP Law – “Unpicking the Government’s Bill to ban upwards only rent reviews” (July 2025)
  4. TLT Solicitors – “Are we about to see the end of upwards-only commercial rent reviews in England and Wales?” (July 2025)
  5. Slaughter and May – “The end of upwards-only rent review?” (July 2025)
  6. Boodle Hatfield – “Proposed ban on upwards only rent review provisions” (July 2025)
  7. Pinsent Masons – “Questions landlords might have about the ban on upwards only rent reviews” (July 2025)

Market Data and Research Reports

  1. Property Industry Alliance – “Property Data Report 2023” (February 2024)
  2. Re-Leased – “UK State of CRE Leasing Report 2024” (July 2024)
  3. MSCI/BNP Paribas – “UK Lease Events Review” (2018-2019)
  4. Strutt & Parker/MSCI – “UK Commercial Property Lease Lengths Continue to Increase” (2016)
  5. Knight Frank – “Meeting the Commercial Property Retrofit Challenge” (2024)

Industry Publications and News Sources

  1. BE News – “Average UK office and retail lease lengths are increasing, data shows” (July 2024)
  2. The Morning Advertiser – “Ban on upward-only rent reviews ‘right move’ for Government” (July 2025)
  3. CoStar – “Government announces plans to ban upward-only rent reviews in commercial leases” (July 2025)
  4. Elite Agent – “UK government plans to ban ‘Upward-Only’ rent reviews in new commercial leases” (July 2025)
  5. Property Mark – “Housing Insight Report” (2023)

International Comparisons

  1. Limerick Post – “Rent reviews in commercial leases” (Ireland experience, 2010)
  2. Irish Times – “Think twice before challenging upward-only rent reviews” (2014)
  3. RTE – “Upward only rent review clauses banned” (Ireland, 2010)
  4. Mondaq – “Upward Only Rent Review Clauses In Commercial Leases In Ireland” (2014)

Commercial Property Finance and Valuation

  1. Commercial Mortgage Guide – “What is a Good LTV for Commercial Mortgages?” (2025)
  2. Investment Property Forum – “Property Investments: A Guide for Financial Advisers” (2017)
  3. Grant Thornton – “Financing headwinds for commercial real estate” (2024)
  4. HMRC – “Loan to value ratios in property lending” (Government guidance)

Economic Analysis

  1. Capital Economics – “UK Commercial Property” reports (2025)
  2. British Property Federation – “UK Commercial Real Estate Economic Footprint 2023” (2024)
  3. DLA Piper – “2023 Mid-Year Real Estate Trends Report” (2023)

Professional Services and Industry Bodies

  1. RICS – “Commercial rent reviews” guidance
  2. BPF – Various reports on commercial property investment market
  3. CBRE – “How are lease terms evolving across the UK’s Industrial and Logistics markets?” (2025)