UK Commercial Rent Crisis: Are Landlords Driving Businesses Under?

The new ban on upward-only rent reviews in commercial leases, set to take effect in 2027, is already reshaping how landlords and tenants negotiate. The English Devolution and Community Empowerment Act, which received Royal Assent on 29 April 2026, means new commercial leases in England and Wales can no longer include clauses that force rents only upwards. The government’s stated view is that these clauses have made rents unaffordable, forced retailers to close, and pushed businesses to fail. For tenants, this sounds like a win. For landlords, it removes a layer of income predictability that has underpinned commercial property valuations for decades. The real picture is more complicated than either side might expect.

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This article is general information only and does not constitute professional advice. For your specific situation, consult a qualified professional.

2027
Year upward-only rent reviews banned in new commercial leases
Lyons Davidson

25%
Trading businesses reporting turnover decrease in May 2026
ONS

5.8%
Average UK gross rental yield on commercial property (2025–2026)
Realyse

33%
Businesses citing economic uncertainty as main challenge in June 2026
ONS

The ban doesn’t apply to existing leases, but lease renewals from 17 March 2026 may already fall under it due to a late amendment. That creates a messy transition period where landlords and tenants need to understand exactly which agreements are affected. Meanwhile, the wider commercial market is dealing with falling tenant demand in some sectors and rising costs across the board. The ONS reports that 25% of trading businesses saw turnover drop in May 2026 compared to April, and 33% say economic uncertainty is their main challenge. Landlords who push rents too hard may find themselves with empty units rather than higher income. Here’s what you actually need to know.

Ban on upward-only reviews is real but not retroactive
New leases from 2027 cannot include upward-only rent review clauses. Existing leases are untouched, but renewals signed after March 2026 may be caught.

Landlords have alternatives, but each carries trade-offs
Fixed rents, index-linked increases, stepped rents, turnover rents, and open-market reviews are all options. None offer the same predictability as upward-only clauses.

Tenant demand is patchy, not uniformly weak
Prime buildings in strong locations still see rental growth. Secondary properties in weaker spots are harder to let. Location matters more than ever.

Regulatory change is accelerating landlord exits
Rising compliance costs, the Renters’ Rights Bill, and uncertainty around rent reform are pushing smaller portfolio holders to sell up.

The central concept here is the upward-only rent review, a clause that has been standard in commercial leases for decades.

Upward-only rent review
A lease clause that allows rent to increase at review dates but never decrease, regardless of market conditions. The ban removes this protection for landlords in new leases from 2027.

What I tend to notice is that tenants often assume the ban is an unqualified win. It isn’t. Landlords can respond by setting higher initial rents, cutting rent-free periods, or tying increases to inflation indexes that may outpace market growth. The trade-off is real. If you’re negotiating a commercial lease right now, it’s worth weighing the new flexibility against what a landlord might take away elsewhere. For a deeper look at how lease structures work in practice, key considerations when renting a commercial space in the UK covers the basics.

What the ban on upward-only rent reviews actually changes

The ban removes a clause that has been a cornerstone of commercial property income. Under an upward-only review, rent could only go up at each review date, typically every three or five years. That gave landlords predictable income growth and made commercial property attractive to investors. The government argues this system pushed rents beyond what businesses could afford, contributing to high street closures and business failures.

From 2027, new leases cannot include these clauses. Lease renewals signed after 17 March 2026 may also be affected, depending on how the late amendment is interpreted. That creates a window where some tenants could benefit from the ban earlier than expected, while landlords face uncertainty about which renewals are caught.

The alternatives landlords can use include fixed rents that stay flat for the term, index-linked increases tied to RPI or CPI, stepped rents that rise by set amounts on set dates, turnover rents based on the tenant’s revenue, and open-market reviews that can go up or down. Each shifts risk between landlord and tenant differently. Index-linked rents, for example, protect the landlord against inflation but can produce steep increases for tenants if inflation runs hot. Open-market reviews are fairer in theory but create uncertainty for both sides.

The cost of losing predictability
Industry analysts warn the ban may lead to higher initial rents, reduced rent-free periods, and increased indexation. The removal of upward-only clauses doesn’t make rent cheaper — it changes how the cost is structured. Tenants who assume they’ll pay less may be in for a surprise.

The Savills cross-sector outlook notes that prime rental growth remains higher than normal across all sectors, but selective tenant behaviour means prime buildings in secondary locations are harder to let. That divergence matters. A landlord with a prime unit in a strong location can still command premium rent without an upward-only clause. A landlord with a secondary unit in a struggling high street may struggle to find any tenant at all, regardless of the lease terms.

For tenants, the practical question is what rent structure works best for their business. A fixed rent gives certainty for budgeting. A turnover rent aligns costs with revenue but requires transparent reporting. Index-linked rents can escalate quickly. The right choice depends on the business’s margin stability, growth outlook, and tolerance for uncertainty. If you’re unsure about the legal implications of a proposed lease structure, a business lawyer can review the terms before you sign.

Where landlords and tenants get this wrong

Assuming the ban applies to all existing leases

This is the most common misunderstanding. The ban only applies to new leases granted from 2027 and potentially to renewals from March 2026. Existing leases with upward-only clauses remain fully enforceable. A tenant who signed a 15-year lease in 2020 with five-year reviews is still locked into upward-only increases until 2035 unless they negotiate a surrender and new lease. Landlords holding older leases can continue to rely on those clauses. The transition period creates a two-tier market where some tenants benefit from the new rules and others don’t.

Thinking the ban means lower rents

Rent is determined by market conditions, not just lease clauses. The ONS data shows 25% of businesses reported turnover decreases in May 2026, and 33% cite economic uncertainty as their main challenge. In that environment, landlords may struggle to raise rents regardless of what the lease says. But in prime locations where tenant demand is strong, the ban doesn’t cap rent — it just changes how increases are structured. Landlords can set higher starting rents to compensate for losing upward-only protection. The net effect may be neutral or even negative for tenants in strong markets.

Ignoring the impact on property valuation

Commercial property is valued based on the income it generates. Upward-only rent reviews provided predictable income growth, which supported higher valuations. Removing them introduces uncertainty. Industry analysts expect this to affect how investors price commercial property, particularly for assets with shorter lease terms or weaker tenant covenants. Landlords planning to sell may find their properties worth less than they expected. Tenants should understand that their landlord’s financial position affects everything from service charge levels to willingness to negotiate repairs.

Overlooking the Renters’ Rights Bill and wider regulatory shift

The ban on upward-only reviews is one part of a broader regulatory overhaul. The Renters’ Rights Bill, expected in 2026, will abolish Section 21 ‘no-fault’ evictions, introduce a landlord register, and enhance enforcement powers. For commercial landlords, the cumulative effect of these changes is significant. Smaller portfolio holders are already exiting the market. The Realyse data shows landlord instructions declining for consecutive quarters, while tenant enquiries still outstrip available stock. That supply squeeze could push rents up even as individual lease terms become more tenant-friendly.

My first move if I were a tenant would be to check whether any lease renewal I’m negotiating falls into the March 2026 window. If it does, the ban may already apply, and I’d want legal advice on how to structure the new terms. If you’re dealing with a complex lease renewal, a tenant and landlord lawyer can clarify where you stand.

How to approach commercial lease negotiations in the new landscape

Understand which rent review options suit your business

The ban removes one option but leaves several on the table. Fixed rents are simplest: you pay the same amount for the whole term, and the landlord takes the inflation risk. Index-linked rents adjust automatically, usually to RPI or CPI, with or without a cap or collar. Stepped rents increase by a set amount on set dates, giving both sides certainty. Turnover rents tie the rent to your revenue, which can be helpful for businesses with variable income but requires the landlord to trust your accounting. Open-market reviews allow rent to go up or down based on market conditions at the review date, which is the fairest option but creates the most uncertainty.

The table below compares the main options on the factors that matter most to tenants and landlords.

→ Scroll right to see all columns

Source: Lyons Davidson analysis
Rent review typeCertainty for tenantCertainty for landlordRisk of large increases
FixedHighLow (no inflation protection)None
Index-linked (uncapped)LowHighHigh if inflation spikes
Index-linked (capped)MediumMediumLimited to cap
SteppedHighHighNone (known in advance)
TurnoverVariable (tied to revenue)Variable (tied to tenant success)Low (falls if revenue falls)
Open-market reviewLowLowDepends on market

Negotiate the rent-free period and break clauses

With upward-only reviews gone, landlords may try to offset their lost income by reducing rent-free periods. A typical commercial lease might include six to twelve months of rent-free fit-out time. That could shrink. Break clauses — the right to end the lease early — may also become harder to secure. Tenants should prioritise these terms alongside the rent review mechanism. A shorter rent-free period can cost more than a slightly higher headline rent. A break clause at year three or five gives flexibility if the business changes. These are the terms that often matter more in practice than the review type.

Factor in the wider market conditions

The Savills outlook notes that prime rental growth is still happening, but only for buildings in strong locations. Secondary properties are struggling. That means negotiating power varies hugely depending on where the property is. A tenant looking at a prime central London office has less leverage than one considering a secondary retail unit in a town with high vacancy rates. The ONS data showing 25% of businesses with falling turnover reinforces that many tenants are under financial pressure. Landlords who ignore that reality risk empty units. Tenants who understand their local market can negotiate from a stronger position.

Watch for the emerging regulatory changes

The ban on upward-only reviews is not the last reform coming. The Renters’ Rights Bill will reshape the residential sector, but its principles may influence commercial policy over time. The government has also committed to consulting on caps, collars, and exemptions for the new rent review rules. That means the current framework could change again within a few years. Tenants signing long leases now should consider whether the flexibility they’re getting today will still look good if the rules shift again. Including a clause that allows renegotiation if the regulatory framework changes is worth discussing with a solicitor.

For a practical look at how these changes affect retail tenants specifically, the empty high street crisis article covers the broader context of falling footfall and rising vacancy rates.

Frequently asked questions about the commercial rent review ban

Does the ban apply to leases signed before 2027?
No. Existing leases with upward-only clauses remain enforceable. Only new leases granted from 2027 and some renewals from March 2026 are affected.
Can a landlord still increase rent without an upward-only clause?
Yes. Landlords can use index-linked, stepped, turnover, or open-market review clauses. They can also set a higher starting rent to compensate for losing upward-only protection.
What happens if my lease renewal was signed in March 2026?
A late amendment to the Act may bring renewals from 17 March 2026 under the ban. The interpretation is not yet settled, so legal advice is recommended.
Will the ban make commercial property less valuable?
It may reduce valuations for properties with shorter leases or weaker tenant covenants, because future income is less predictable. Prime assets in strong locations are less affected.
Are there any exemptions to the ban?
The government must consult on potential exemptions, caps, and collars. No exemptions have been confirmed yet. The consultation process is expected in late 2026.
Can I negotiate a turnover rent instead of a fixed increase?
Yes. Turnover rents are one of the permitted alternatives. They tie rent to your revenue, which can help during slow periods but requires transparent financial reporting to the landlord.

The ban changes the rules, but not the market

The removal of upward-only rent reviews is a structural shift in how commercial leases work in England and Wales. But it doesn’t change the fundamental economics of supply and demand. In strong locations with limited vacancy, landlords still have pricing power. In struggling high streets with falling footfall, tenants still hold the cards. The ban removes one tool from the landlord’s kit, but they have others. Tenants who assume the new rules automatically mean cheaper rent are likely to be disappointed. The real opportunity is in understanding the full range of rent review options and negotiating the terms that fit your business model, not just the headline rent figure.

Remember: this article is general information only. For advice on your specific situation, speak to a qualified professional.

If this was useful, you might also want to read understanding tenant service charges: tips for renting in the UK.

Sources and Further Reading

Key considerations when renting a commercial space in the UK — A practical guide to lease terms, rent deposits, and negotiation points for first-time commercial tenants.

Understanding public market lease agreements in the UK — Explains how market leases differ from standard commercial leases and what tenants should watch for.

Lyons Davidson (2026). The new ban on upward-only rent reviews: what commercial landlords and tenants need to know. 🔗

Office for National Statistics (2026). Business insights and impact on the UK economy. 🔗

Realyse (2026). Rental growth slows as UK landlord exodus continues. 🔗

Savills (2026). UK cross-sector outlook 2026: commercial. 🔗

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Sam Willy

I’m Sam Willy, one of the bright minds behind BritWealth.com, where I share insights, stories, and fun ideas about a wide range of topics—finance included, but not limited to it! My journey into the world of writing began with a simple hobby: sharing the things that fascinated me. From quirky facts to deeper dives into personal development, I’ve always been curious about the world around me and love passing that knowledge on.
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