LOGIC: Logistics Sector Update - Autumn 2025
Upwards-Only Rent Reviews: A Shift in the Real Estate Landscape
By Sarah Keens
On 10 July 2025, the Government issued the draft English Devolution and Community Empowerment Bill (the "Bill") which proposed a ban on upwards-only rent reviews in new and renewal leases. This marked a significant departure from established commercial leasing practices which could have far-reaching implications for the industrial and logistics sector. Upwards-only rent reviews have traditionally provided landlords with income certainty, ensuring rents remain stable or increase regardless of market fluctuations. The proposed ban would remove this mechanism across various rent mechanisms.
While the Government’s aim is to create a fairer leasing environment and support tenant resilience, the scope of the Bill extends to all business tenancies (save for a few exemptions). For the logistics sector, where long-term leases support capital-intensive operations and bespoke fit-outs, the removal of upwards-only rent review clauses introduces income variability and strategic uncertainty. This could alter lease negotiation dynamics, impact valuation models, and require both landlords and tenants to reassess risk exposure and long-term planning.
Implications for Landlords
Upwards-only rent reviews have historically underpinned income stability for institutional landlords, particularly in the logistics sector where long-term warehouse leases support predictable cash flows and valuation models. The proposed ban on upwards-only rent reviews may complicate budgeting and forward-planning for asset managers but, in response, landlords may adjust initial rent levels to hedge against future downside risk, potentially inflating entry costs for occupiers.Alternative structures, such as stepped rents, could offer income visibility but such an approach will distort rental yields over time. This shift may also introduce valuation ambiguity, particularly for assets reliant on indexed or open-market reviews, thereby affecting yield forecasts. If the Bill is enacted and lease structures develop, investors will need to reassess underwriting assumptions and recalibrate risk models to maintain portfolio resilience.
Implications for Tenants
In the logistics sector, where leases are often 10 to 20 years in length due to bespoke building specifications and substantial tenant fit-out costs, the proposed ban on upwards-only rent reviews introduces both opportunity and risk. Tenants may benefit from greater flexibility and the potential for rent reductions during economic downturns, improving lease agility and cost control. However, landlords are likely to respond with higher starting rents to hedge against future income volatility, which could offset short-term savings. For tenants investing heavily in racking, automation, or temperature-controlled infrastructure, shorter lease terms may be less viable, increasing exposure to renegotiation risk. The Bill’s provision allowing tenants to initiate rent reviews if landlords delay adds further leverage but may also complicate long-term budgeting. If the Bill is enacted and lease structures develop, occupiers will need to reassess location strategy, fit-out amortisation, and lease renewal planning to maintain operational resilience.
Concerns for the Investment Market
The proposed reforms could realign asset valuations and heighten lender risk sensitivity, prompting more defensive capital placement and a slowdown in development activity. While the UK property market is generally resilient, uncertainty around rent review structures introduces pricing opacity. John Banbury of Allsops cautioned that index-linked leases, often outperforming market growth in secondary assets, may deter tenant demand, undermining rental stability. British Property Federation CEO, Melanie Leech CBE, criticised the Government’s interventionist stance, urging a shift towards frameworks that empower local stakeholders and preserve investor confidence.
Ireland’s 2010 ban on upwards-only rent reviews created initial uncertainty but it has been considered to have been largely successful by commentators in the Irish property market. While Ireland’s 2010 ban provides a valuable reference point, the UK’s greater market depth and investor exposure imply that similar reforms could trigger broader and more complex repercussions.
Stakeholders across the logistics sector, including tenants, landlords, institutional investors, and developers must remain engaged and proactive in shaping the consultation process to safeguard operational and financial interests.
Conclusion
The proposed ban on upwards-only rent reviews was introduced without prior consultation and has drawn sharp criticism from industry bodies raising concerns that its broader implications remain underexplored. With the Bill still at an early parliamentary stage and no clear timeline for enactment, uncertainty prevails. Stakeholders across the logistics sector, including tenants, landlords, institutional investors and developers must remain engaged and proactive in shaping the consultation process to safeguard operational and financial interests. If implemented, the legislation would mark a fundamental shift in commercial leasing, with particular significance for logistics, where lease structures underpin long-term investment and occupier strategy.
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