What the end of upwards only rent reviews means for the retail sector

Solicitor apprentice Florence Wharton explores the implications

For more than three decades, upwards only rent review clauses have stood as one of the most defining, yet enduringly contentious, features of the UK’s commercial leasing landscape. Upwards only rent review clauses are prominent within the retail sector where they have long served as a strategic instrument for landlords navigating an evolving and often volatile market.

By guaranteeing that rent may only move in one direction at review, never downwards, even in contracting markets, upwards only rent review clauses have long functioned as a formidable safeguard for landlords. They have preserved the stability of income streams, bolstered investment valuations, and provided a reliable foundation for development financing, collectively shaping the confidence and capital flows upon which much of the modern commercial property sector has depended.

Upward only rent review clauses can also work in a tenant’s favour, translating a landlord’s income certainty into lower starting prices and more generous incentives at the outset, which can help reduce initial occupational costs. That said, in retail environments they can place additional pressure on tenants, preventing rents from falling in line with a declining market and hence reducing affordability, and indeed reducing flexibility over the course of a lease.

This poses the question: when the only way is up, is retail left behind?

The English Devolution and Community Empowerment Bill, launched into the Commons on 10 July 2025, takes direct aim at the long standing upwards only rent review orthodoxy. Under its proposals, any clause that prevents rent from dropping, and whose revised figure cannot be known at the point of grant, is headed for the legislative chopping block. That means open market reviews, variable index linked uplifts, and even turnover based mechanisms all find themselves squarely in the firing line.

Some have long argued that upward only rent reviews warp natural price correction and freeze rents at levels entirely divorced from economic reality. The bill appears to represent a recognition of long standing commentary on rent review practices, yet introduced without prior consultation, many have been taken by surprise.
The government’s headline justification is straightforward: embattled retailers deserve a fighting chance. With business rates climbing, online competition biting, and high street footfall drifting away, ministers insist that permitting rents to fall at review is not radical: it’s a survival strategy.

In essence, the aim is to give occupiers greater flexibility to manage costs in challenging trading conditions before the shutters come down for good.

When the rent stops rising, the stakes start shifting

An immediate outcome for retailers is likely to be a shake up in the negotiating dynamics between landlords and tenants, reshaping how deals are struck on the high street. Allowing rents to fall introduces a long-absent sense of flexibility, with future reviews more likely to mirror actual trading performance rather than the typical upward only trajectory within the leasing market.

In weaker locations, this increased responsiveness could lighten rental burdens and should help occupiers maintain stores that might otherwise have been earmarked for closure. Flexibility in rental structures may well lead to greater retail resilience meaning the reforms could perceivably contribute to longer term occupier stability.

Investors, unsurprisingly, are approaching the change with greater caution.
Retail focused Real Estate Investment Trusts and institutional landlords now face the prospect of valuation adjustments, as the removal of guaranteed upwards movement introduces the unfamiliar possibility of downward rent drift.

This is expected to reverberate through yield expectations, loan to value assessments, and the underwriting of forward funded retail development. Investor confidence may soften as the predictability once offered by upwards only rent review clauses disappears from the modelling toolkit. The centrality of predictable rental growth in retail investment appraisal techniques is soon to be lost.

Inevitably, landlords will need to adapt. Landlords may respond by increasing initial headline rents to offset the risk of downward reviews, a trend already being speculated upon in market briefings.

A shift towards shorter lease terms is also likely, bringing the United Kingdom’s retail leasing closer to the more flexible norms seen elsewhere. Meanwhile, stepped and index linked rents, which remain allowed under the proposed reforms, are anticipated to feature more frequently in new leases.

Techniques such as dual trigger mechanisms, collars and caps, and the option for tenant initiated reviews may gain traction as parties search for contractual equilibrium.

The unintended consequences

The retail sector has already experienced a prolonged decline in development activity, and the removal of upwards only rent reviews risks placing further pressure on the viability of new schemes. Without the comfort of predictable rental uplifts, some projects may struggle to attract funding, potentially slowing down the regeneration of high streets and limiting the delivery of new or refurbished retail space.

Certainly, the loss of upward only rent reviews may mean that some developments no longer meet lenders’ funding requirements, forcing the existing property stock to handle all the demand instead.

Geographical advantage: a tale of two cities?

The ban may also lead to greater market polarisation. Prime retail destinations, where tenant demand remains strong, may continue largely unaffected by the reforms. Secondary and tertiary locations, however, could face increased volatility, higher financing costs, and more frequent lease renegotiation.

So, does the bill truly give the communities who really need it “stronger tools to shape their local areas.”

The abolition of upward only rent reviews represents far more than a tidy piece of legislative housekeeping. It marks a fundamental re setting of the framework governing retail leasing. In the short term, many retailers may welcome the relief offered by more responsive rent levels. Over the longer term, however, landlords, developers, and investors will need to navigate a more uncertain environment, one where valuation predictability is muted and development economics become more fragile.

The ultimate success of the reform will depend on the detail of the secondary legislation that follows, the speed with which the market adapts to alternative rent review structures, and the ability of landlords, tenants, and lenders to recalibrate well worn commercial behaviours. From both an academic and practical vantage point, the reform marks a meaningful rebalancing of leasing norms, one that is likely to reshape the contours of the United Kingdom’s retail real estate for years to come.

Florence Wharton is a solicitor apprentice at Schofield Sweeney LLP based in their Leeds office. She is currently working within the firm’s Property Litigation team, alongside studying for an LLB (Hons) in Law & Legal Practice (Solicitor) with BPP University Law School. Florence is particularly interested in contentious real estate work. She also sits on the Leeds Junior Lawyers Division committee, where she acts as its Sponsorship Officer.