Unpacking the Proposed Ban on Upward-Only Rent Reviews

Posted by Glenny on 11th August 2025 -

A recent announcement from the UK Government has become a key talking point in the commercial property market. The English Devolution and Community Empowerment Bill introduces plans to ban upward-only rent review (UORR) clauses in new commercial leases across England and Wales. This initiative, designed to support businesses, will require landlords to consider fixed rents or review mechanisms that allow for both increases and decreases. Crucially, existing leases will not be affected (Co-star News, 2025).

At Glenny LLP, our Lease Advisory and Valuation teams are diligently assessing the potential implications of this proposed legislative shift, offering expert insights into what this could mean for landlords and tenants, particularly within the industrial real estate sector.

What has been announced?

On July 10, 2025, the UK Government introduced a provision within the English Devolution and Community Empowerment Bill proposing a ban on upward-only rent review clauses for new commercial leases in England and Wales. This means landlords will need to opt for either fixed rents or review mechanisms that allow for both increases and decreases. While existing leases are unaffected, the ban will apply to new and some renewal leases (under Part II of the Landlord and Tenant Act 1954). If included, an upward-only clause in such leases would become unenforceable, with rent determined by other specified methodologies, such as RPI. Limited areas such as agricultural leases will be exempt.

What it Actually Means in Practice:

The announcement has certainly sparked widespread discussion across the industry. Paul Aylott, Head of Glenny Lease Advisory and Valuation, highlights:

"There was no industry consultation on these proposals, which were introduced via the Devolution Bill. We expect significant industry discussion as the Bill progresses. Crucially, these proposals relate to new leases only, not existing ones, though the clarity on renewals is still awaited. Given the rise of shorter-term leases, which often already incorporate mechanisms for upward and downward adjustments, the practical impact may vary. In our experience within this sector, instances justifying downward rent adjustments have been rare in the past decade, underscoring that ultimately, the market prevails."

William Martin, Lease Advisory Divisional Director, anticipates significant industry resistance. He notes:

 "This change will not come easily. Tenants will now need to secure leases with upward/downward clauses at new leases/renewals, which could lead to more intense negotiations. Landlords are likely to push for even more short-term leases outside the Landlord and Tenant Act, which already form the majority of leases. For longer leases, we anticipate a shift towards alternative mechanisms like turnover or CPI-linked reviews, mirroring trends seen in retail. Standard industrial properties with clear market dynamics, such as logistics, may see less disruption, but markets with greater uncertainty, like isolated self-contained offices, could face increased valuation uncertainty."

William concludes that "The role of active letting agents will increase in importance regarding the 'occupational piece' for investments, as supply and demand to particular markets become even more crucial as lease lengths diminish further."

Sam Coker, Lease Advisory Associate, summarises that "The overriding point is the reduced landlord incentive for long-term tenant lock-in if rents can decrease, inevitably leading to shorter leases. While there's typically a discount for additional term certainty, this could diminish as longer terms offer less benefit if rents can fall. In our industrial market, rack-rented properties are rare, but if growth stalls post-2027, this dynamic could become more prominent."

Industrial Market: Why Downside Risk is Already Minimal

Despite some softening in industrial rents during 2024, our analysis of 5-year rent reviews (2020-2025) still captures the strong post-COVID surge in industrial rents from 2021-2022. Our Glenny LLP Q1 2025 Databook confirms significant uplifts in our core regions. While recent growth has plateaued, this historical context makes negative rental adjustments unlikely in the industrial sector. With industrial take-up rising by approximately 10% to 5.4 million sq ft in 2024, occupier demand remains robust, further reducing the likelihood of downward rent movements.

Retail and Offices: Modest Negativities More Plausible

Conversely, the retail and office sectors exhibit more volatility. Structural challenges persist for secondary offices and many high street units, where downward rent adjustments may occasionally be seen. However, prime locations often show stabilised or recovering rents, making such adjustments highly case-specific.

Shorter leases, fewer rent reviews

A broader market trend sees commercial leases, particularly in industrial, trending shorter. Sub-10-year terms and mid-term break clauses are common, naturally reducing the relevance and frequency of traditional 5th-year rent reviews. This existing market dynamic will likely limit the practical impact of the legislative reform on many new leases.

Market Reaction & Adaptation

The government's announcement has naturally prompted diverse reactions across the industry. While the British Property Federation (BPF) has expressed strong concerns regarding the lack of prior consultation and potential impact on investor confidence, organisations like the Federation of Small Businesses (FSB) have welcomed the prospect of relief for their members. Industry experts broadly highlight the potential for increased uncertainty, urging comprehensive impact assessments and consultation. Notably, CoStar News reported a downturn in the share prices of leading UK REITs following the announcement.

Lease Terms & Negotiation Trends

There is still uncertainty over how the new rules will apply in practice, particularly concerning lease renewals under the Landlord and Tenant Act 1954. If lease renewals are included, landlords may seek compensation through other terms, such as:

• Higher initial rents to offset potential future rent reductions
• Leases contracted outside the Act to allow greater flexibility
• Reduced rent-free incentives and tighter conditions around breaks and dilapidations

This would rebalance negotiations in the absence of upward-only reviews and allow landlords to preserve asset value.

Valuation Impacts and Yield Compression

Valuers and institutional investors will likely scrutinise the risk of future rental decline more carefully. In weaker markets, this could contribute to yield softening. However, in industrial where rent reviews are still expected to show positive growth (due to the 5-year lag effect noted above), asset values are unlikely to be significantly impacted.

Conclusion

The Government’s proposed ban on upward-only rent reviews, while significant in principle, may have a more limited practical impact than initially perceived, particularly in an industrial real estate market already trending towards shorter, more flexible leases and front-loaded rents. For industrial properties, where 5-year rent reviews are still capturing post-2021 growth, we anticipate a muted effect on valuations and rent levels.

The crucial clarity awaited is whether these rules will extend to lease renewals. Should they, we expect landlords to adapt by seeking offsetting terms to preserve rental certainty. While the immediate outlook may appear to favour tenants, the underlying economics of negotiation will inevitably rebalance through more nuanced deal structures. For our Lease Advisory professionals, the technicalities may evolve, but our core commitment to precise market understanding and agile adaptation remains steadfast.

This is a developing issue, and Glenny LLP will continue to monitor the progress of the English Devolution and Community Empowerment Bill and provide further insights as details emerge. We are committed to providing our clients with the most up-to-date and practical advice to navigate these changes.