The end of upward-only rent reviews could change how investors see real estate

The UK government’s decision to ban upward-only rent reviews (UORRs) in new commercial leases marks one of the most significant changes to property investment fundamentals in decades. A senior director at one of the UK’s largest real estate industry organisations I met last week, told me since the Act to ban UORRs received Royal Assent in April, it has become the number one concern for many of his landlord and investor members. Why?

Because UORRs have always been the cornerstone of income security for real estate investors, providing landlords with protection against falling rental values, helping to underpin valuations, lending decisions and long-term return expectations. Ending UORRs means future leases can reflect market rent movements in both directions, altering how risk is allocated between landlords and occupiers.  

Although the Act to ban UORRs is officially law, it is not yet in force. It is expected to take effect in 2027 or 2028, meaning there is time for the legislation to be watered down or structurally modified. However, for communications professionals in real estate, responsible for supporting capital raising by promoting their firms’ funds and projects, now is the time to consider how to respond to institutional investors. These investors could now see real estate as a different, riskier investment that may no longer offer the predictable, long-term, and inflation-linked cash flows it has always been relied on for.  

Long-term bonds with guaranteed fixed coupons may start to look ever more attractive when compared with real estate rental income streams that could be revised downwards for the first time. This may especially be the case in the minds of major pension fund managers responsible for managing long-term liabilities. 

The good news is that driving superior risk-adjusted returns from real estate is about much more than contractual rental protections and lease mechanics alone. Nevertheless, it will be the property industry’s job to ensure external investors understand how portfolio income resilience is generated in a world where lease structures provide less certainty. 

Experienced property investors know full well that asset quality, tenant demand, occupancy performance, lease expiry profiles and asset management capability are overwhelming drivers of returns. If all these are positive, it’s far less likely rents will be revised downwards at the next review. Part of the reason the government has pressed ahead with banning UORRs is so rents can fall when property values drop and businesses aren’t left with artificially high rents. However, expert asset managers and landlords shouldn’t see the value of quality assets drop significantly if they have the right strategy, especially over the long term.

Real estate fund and asset managers best positioned to maintain confidence among investors will be those able to clearly demonstrate that their active management, refurbishment programmes, operational excellence and strong occupier relationships can support income growth and protect value long into the future. As some investors reassess risk in the sector, communications campaigns that highlight team skill sets and track records, strong asset performance, successful strategies for driving rental growth, and portfolio resilience will become more important than ever.