LOGIC: Logistics Sector Update - Summer 2026
The Ban on Upwards-Only Rent Reviews: Implications for the Logistics Sector
By Sarah Keens
Legislation to ban upward-only rent review provisions in commercial business leases is now law, with the English Devolution and Community Empowerment Act 2026 receiving Royal Assent on 29 April 2026. The ban is not yet in force and is not expected to take effect before 2027. Once in force, it will catch all new and renewal leases (unless granted under a pre-commencement agreement, for example an option or agreement for lease). Its impact is therefore already being felt across logistics investment and occupational markets.
Background and and Legislative Journey
In an earlier edition of LOGIC , we explored the background to the ban (a link to that article is here). A key development since that article was the introduction of a limited retrospective element. In broad terms, this means any lease entered into from 17 March 2026 onwards which includes renewal arrangements, this covers options to renew and any other agreement with an existing tenant for a future renewal lease (but not the immediate grant of a reversionary lease) will be caught by the ban for both initial rent and any future reviews in the renewal lease granted on or after the ban comes into force.
Where you already have such tenancy renewal arrangements, the future leases granted out of these arrangements are, depending on when granted, already caught by the ban.
Background and and Legislative Journey
In an earlier edition of LOGIC , we explored the background to the ban (a link to that article is here). A key development since that article was the introduction of a limited retrospective element. In broad terms, this means any lease entered into from 17 March 2026 onwards which includes renewal arrangements, this covers options to renew and any other agreement with an existing tenant for a future renewal lease (but not the immediate grant of a reversionary lease) will be caught by the ban for both initial rent and any future reviews in the renewal lease granted on or after the ban comes into force.
Where you already have such tenancy renewal arrangements, the future leases granted out of these arrangements are, depending on when granted, already caught by the ban.
Why Logistics is Disproportionately Affected
The logistics sector is particularly exposed to this reform because it has traditionally relied upon long-term leases structurally more dependent on upwards-only rent reviews as the bedrock of its investment model. Whilst, unlike the retail and other market sectors which have already diversified, with post-Covid lease structures reflecting shorter lease terms of five years or less with no rent reviews (e.g. 3PLs looking to fall in line with their retail clients), in general logistics/industrial leases remain substantially longer in duration, often ten to fifteen years or more. This means that rent review provisions are a central feature of logistics leases playing an integral role in valuations, funding models and investment strategies.
The ban may introduce greater income volatility, complicating cash flow forecasting and potentially weakening covenant strength. For logistics investors, the concern is that without the certainty of a rental base, long-term income streams become harder to forecast, potentially depressing asset valuations and widening lending margins. Furthermore, institutional investors and pension funds have been drawn to real estate within the logistics sphere precisely because of its long-term, inflation-linked income, which may now be threatened if rents can fall as well as rise.
Why Logistics is Disproportionately Affected
The logistics sector is particularly exposed to this reform because it has traditionally relied upon long-term leases structurally more dependent on upwards-only rent reviews as the bedrock of its investment model. Whilst, unlike the retail and other market sectors which have already diversified, with post-Covid lease structures reflecting shorter lease terms of five years or less with no rent reviews (e.g. 3PLs looking to fall in line with their retail clients), in general logistics/industrial leases remain substantially longer in duration, often ten to fifteen years or more. This means that rent review provisions are a central feature of logistics leases playing an integral role in valuations, funding models and investment strategies.
The ban may introduce greater income volatility, complicating cash flow forecasting and potentially weakening covenant strength. For logistics investors, the concern is that without the certainty of a rental base, long-term income streams become harder to forecast, potentially depressing asset valuations and widening lending margins. Furthermore, institutional investors and pension funds have been drawn to real estate within the logistics sphere precisely because of its long-term, inflation-linked income, which may now be threatened if rents can fall as well as rise.
Market Response and Practical Consequences
Landlords and developers will be adapting and exploring alternative mechanisms to protect income, including index-linked rent reviews without collars, stepped rent increases, and shorter lease terms to capture open market rental growth. Colliers has noted that historically, CPI, RPI, and open market rents have rarely declined in the industrial sector, meaning any perceived tenant benefit from the proposed changes may be limited, while landlords face heightened exposure to downside risk.
The shift away from traditional upwards-only rent reviews could also make lease structures more complex, lengthening negotiations and increasing the potential for contention between parties. There may also be a stronger yield premium for prime logistics assets with RPI index-linked leases, while secondary assets or locations see greater negative yield movement, widening the pricing differential.
For tenants in the logistics sector, the ban offers the prospect of rents that better reflect market conditions rather than being locked into perpetual upward movement. However, tenants should be cautious about assuming a dramatic shift; landlords will likely seek to rebalance risk through fewer incentives, higher initial rents, and reduced lease flexibility (depending on asset quality and market conditions).
Market Response and Practical Consequences
Landlords and developers will be adapting and exploring alternative mechanisms to protect income, including index-linked rent reviews without collars, stepped rent increases, and shorter lease terms to capture open market rental growth. Colliers has noted that historically, CPI, RPI, and open market rents have rarely declined in the industrial sector, meaning any perceived tenant benefit from the proposed changes may be limited, while landlords face heightened exposure to downside risk.
The shift away from traditional upwards-only rent reviews could also make lease structures more complex, lengthening negotiations and increasing the potential for contention between parties. There may also be a stronger yield premium for prime logistics assets with RPI index-linked leases, while secondary assets or locations see greater negative yield movement, widening the pricing differential.
For tenants in the logistics sector, the ban offers the prospect of rents that better reflect market conditions rather than being locked into perpetual upward movement. However, tenants should be cautious about assuming a dramatic shift; landlords will likely seek to rebalance risk through fewer incentives, higher initial rents, and reduced lease flexibility (depending on asset quality and market conditions).
For tenants in the logistics sector, the ban offers the prospect of rents that better reflect market conditions rather than being locked into perpetual upward movement.
For tenants in the logistics sector, the ban offers the prospect of rents that better reflect market conditions rather than being locked into perpetual upward movement.
Looking Ahead
The government has indicated it will consult on the use of caps and collars in rent reviews before the ban comes into force, which would set a limit on how far a reviewed rent can increase or decrease. This mechanism may provide some comfort to logistics investors and lenders seeking a degree of income certainty. In the meantime, all interested parties in the sector should review live transactions, consider re-gearing existing leases, and model the financial impact of operating in a two-way rent environment. The market will readjust, but for logistics, the transition may prove more consequential than for other commercial sectors with a more dynamic, but less predictable, leasing environment.
Looking Ahead
The government has indicated it will consult on the use of caps and collars in rent reviews before the ban comes into force, which would set a limit on how far a reviewed rent can increase or decrease. This mechanism may provide some comfort to logistics investors and lenders seeking a degree of income certainty. In the meantime, all interested parties in the sector should review live transactions, consider re-gearing existing leases, and model the financial impact of operating in a two-way rent environment. The market will readjust, but for logistics, the transition may prove more consequential than for other commercial sectors with a more dynamic, but less predictable, leasing environment.
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