What the ban on upwards-only rent reviews means for occupiers

FROM PROPOSAL TO POLICY REALITY

With effect from the 29^th April, the ban on upward-only rent reviews (UORRs) formally entered into law, marking a significant shift in the relationship between owners and occupiers.  While the debate around UORRs has been live for some time, the transition from proposal to enacted reform has arrived with relatively limited visibility among occupiers, despite the scale of its potential implications.

As the market now moves from theory to practice, occupiers must consider not only the intended benefits of the new framework, but also how landlord behaviour, lease structures and pricing dynamics are likely to adjust in response.

FROM UPWARDS-ONLY TO BIDIRECTIONAL REVIEWS

The removal of UORRs introduces a fundamentally more bidirectional approach to rent reviews, with rents able to adjust downward as well as upward in line with market conditions.  In principle, this should curb excessive rental inflation and support greater cash-flow resilience for occupiers, particularly through economic downturns.

However, as the new regime beds in, occupiers will increasingly encounter a more complex balance of reward and risk.  While downside protection is now embedded in statute, it will sit alongside new commercial trade-offs that require careful navigation at lease negotiation and portfolio strategy level.

POTENTIAL UPSIDES

• Automatic Downside Protection
  In softer market conditions, rents should now adjust downward more transparently, reducing the risks of occupiers remaining locked into rents materially above prevailing market levels.

• International Alignment and Competitiveness
  The removal of UORRs brings leasing practice into closer alignment with many European and North American markets, simplifying cross-border portfolio management for multinational organisations.

• Better Fit with Business Planning Cycles
  Greater flexibility around review mechanisms and timing allows occupiers to align real estate costs more closely with business plans, product cycles, funding events and operational milestones.

• Improved Transparency and Benchmarking
  More frequent use of open-market and indexed reviews should increase reliance on robust benchmarking data, giving occupiers clearer visibility over relative value and stronger grounds on which to challenge mispricing.

COUNTERINTUITIVE DRAWBACKS

While the legislative change is tenant-friendly in intent, a number of second-order consequences may emerge as market participants adjust.

• Reduced Up-Front Incentives

  With greater future rental uncertainty, landlords may seek to limit exposure by reducing rent-free periods, fit-out contributions or other capital incentives, effectively shifting value from the front end of the lease into the headline rent.

• More Complex Review Mechanisms

  To manage volatility, lease structures may increasingly incorporate hybrid mechanisms – blending open-market reviews, indexation, stepped rents or caps and collars.  While these may smooth outcomes, they risk increasing both complexity and cost for occupiers.

• Shorter Leases and Stronger Break Rights

  Landlords may favour shorter lease terms to preserve refinancing flexibility.  While this can increase occupier optionality, it may also lead to more frequent relocations, higher churn costs and greater operational disruption.

• Reduced Development & Supply Constraints

  Upward-only rent certainty has historically underpinned development financing.  Its removal may make some projects hard to fund, potentially tightening supply in growth markets and placing upward pressure on rents over time despite the new review framework.