Commercial property in the UK is seeing a curious split. Prime rental growth has been running higher than normal, not because tenant demand is booming, but because very little new space is being built. According to Savills research, undersupply is the main driver, and unless a wave of new developments or tenant exits changes the picture, that pressure on rents will continue. That sounds like good news for landlords, but the reality is more complicated. Different sectors are moving at different speeds, and the rules around leases and service charges are shifting. Here’s what you actually need to know.
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This article is general information only and does not constitute professional advice. For your specific situation, consult a qualified professional.
Renting out commercial property isn’t like letting a flat. The leases are longer, the legal framework is different, and the stakes are higher. Whether you’re looking at a retail unit, an office, or industrial space, getting the basics right from the start saves a lot of trouble later. I’ve watched landlords trip over the same issues year after year — service charge disputes, lease renewal confusion, and underestimating how much the market has changed. Let’s walk through what actually matters.
Understanding commercial leases and the key term you need to know
Commercial leases are governed by the Landlord and Tenant Act 1954, which gives tenants a right to renew their lease when it ends. Landlords can contract out of this, but the rules around that are changing. The Law Commission has provisionally supported keeping the current model, but the minimum term for a contracted-out tenancy could increase to two years. That means if you want the flexibility to end a tenancy without renewal rights, you may need to offer a longer lease.
What I tend to notice is that landlords focus on the rent amount and forget about the mechanics of how the lease ends. A tenant with security of tenure can’t simply be asked to leave. You need a court order or a valid break clause. If you’re planning to sell the property or redevelop it, that matters a lot. For a deeper look at how property cycles affect these decisions, this piece on market corrections covers the broader picture.
Why the current market conditions matter for landlords
The UK commercial property market is in an unusual phase. Investment sentiment improved slightly in late 2025, with net lending secured against commercial property rising to £6.69bn — the highest since May 2020, according to Colliers. But that doesn’t mean it’s easy to find good tenants. Prime buildings in secondary locations are harder to let than normal, which is a sign that tenants are being picky.
Take retail as an example. National retail absorption turned positive for the first time in two years, but that was led by retail parks, not high street shops. Value-oriented retailers are driving demand, while premium brands are more cautious. If you own a high street unit in a town that’s lost its anchor store, you may struggle to find a tenant at the rent you want. Meanwhile, office landlords in London are seeing record prime rents because Grade A vacancy is near historic lows of 1–1.5%. But regional offices are a mixed bag.
One thing I’d weigh up is whether your property is in a location that will still attract tenants if the economy softens. The UK government can only create an environment for growth, not deliver it directly, as Savills notes. Reducing policy uncertainty helps, but it doesn’t fill empty units. If you’re considering a purchase, this article on property investment myths might help you separate the signal from the noise.
Where landlords get it wrong
Ignoring the new service charge rules
The updated RICS Professional Standard on service charges in commercial property came into effect on 31 December 2025. It’s compulsory for RICS-accredited professionals and aims to improve transparency and fairness. While it’s not legally binding and doesn’t override lease terms, tenants are increasingly expecting landlords to follow it. If your service charge breakdown is vague or your costs aren’t justified, you could face disputes. A tenant who feels overcharged may withhold rent or challenge the charges at renewal. The fix is straightforward: get your service charge accounts in order, provide clear breakdowns, and make sure your managing agent is RICS-accredited.
Misunderstanding security of tenure
Many landlords assume they can simply end a commercial lease when it expires. That’s not how it works under the Landlord and Tenant Act 1954. If you haven’t contracted out, the tenant has a right to renew. The Law Commission’s provisional conclusion supports keeping this model, but the minimum term for a contracted-out tenancy may rise from six months to two years. If you’re planning to sell or redevelop, a tenant with security of tenure can delay your plans by months. The solution is to contract out properly at the start, using the prescribed form, and to be aware that the rules may tighten.
Overlooking the ban on upward-only rent reviews
The government’s English Devolution and Community Empowerment Bill proposes to prohibit upward-only rent reviews in new and renewal commercial leases. That means you won’t be able to guarantee that rent will only go up. If you’re used to relying on upward-only clauses to protect your income, you’ll need to think differently. Future rent reviews may go down as well as up, depending on market conditions. For existing leases, the clause remains enforceable, but for new ones, you’ll need to factor in the possibility of falling rents. If you’re unsure how this affects your portfolio, speaking to a real estate lawyer can clarify your position.
Ignoring sector-specific trends
Not all commercial property is the same. Industrial vacancy is at its highest in over a decade, yet take-up in 2025 surpassed 2024, driven by demand for larger units. Retail rental growth is forecast to slow from 3.1% in 2025 to 2.4% in 2026. Office returns are expected to hit 9% in 2026, but that’s driven by London. If you own a regional office in a secondary location, your experience will be very different. The mistake is treating all commercial property as one asset class. You need to understand the specific dynamics of your sector and location.
→ Scroll right to see all columns
| Sector | 2025 Rental Growth | 2026 Forecast | Key Trend |
|---|---|---|---|
| Retail | 3.1% | 2.4% | Retail parks outperforming high street |
| Office (London) | Record prime rents | 9% total returns | Grade A vacancy near historic low |
| Industrial | Modest | ~3% rental growth | Vacancy at decade high, but take-up rising |
How to set up a commercial tenancy that works
Choose the right lease structure
The type of lease you offer affects everything from your income stability to your exit options. A full repairing and insuring (FRI) lease puts most costs on the tenant, which is common for whole buildings. For multi-let properties, you’ll typically handle the structure and common areas while the tenant looks after their own space. With upward-only rent reviews being banned in new leases, you’ll need to think about how to structure rent increases. Index-linked reviews or fixed uplifts are alternatives, but they come with their own risks. If inflation stays low, a fixed uplift might leave you above market rent.
Get the legal paperwork right
Contracting out of security of tenure requires a specific procedure. The tenant must sign a declaration before the lease is granted, and the lease itself must contain a prescribed clause. If you miss a step, the tenant retains their renewal rights. With the proposed increase in the minimum term to two years, you’ll need to plan for longer commitments if you want the flexibility to end the tenancy. A property lawyer can handle the paperwork and make sure nothing is missed.
Manage service charges transparently
The new RICS code on service charges is not legally binding, but it sets a benchmark that tenants will expect. Provide an annual budget, a year-end statement, and a clear breakdown of costs. If you’re managing the property yourself, consider using a property management software tool to track expenses and generate reports. Tenants who understand what they’re paying for are less likely to dispute charges.
Plan for the future of your sector
The industrial sector is rebalancing, with vacancy at its highest in over a decade but take-up improving. Retail is stabilising but shifting toward value-oriented formats. Offices are polarising between prime and secondary. If you’re in a sector that’s facing headwinds, consider whether your property needs upgrading to attract tenants. A Grade A office in a secondary location may still struggle, but a well-located industrial unit with good transport links could perform well. The key is to match your property to what tenants actually want, not what you hope they’ll want.
Frequently asked questions
Can I end a commercial lease early if I want to sell the property? ▾
What happens if my tenant stops paying rent? ▾
Do I need an EPC for a commercial property? ▾
What’s the difference between a contracted-out and non-contracted-out lease? ▾
Are service charges capped in commercial property? ▾
How do I handle a tenant who wants to assign the lease? ▾
The market is shifting — don’t rely on old assumptions
The commercial property market in the UK is being reshaped by undersupply, regulatory change, and sector-specific trends. Prime rental growth looks healthy, but it’s built on a lack of new space, not strong demand. The ban on upward-only rent reviews, the new service charge code, and the potential changes to security of tenure all point in one direction: landlords need to be more transparent and flexible than before. My advice is to focus on the quality of your property, the clarity of your lease, and the strength of your tenant relationships. Those are the things that will carry you through whatever comes next.
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 Are UK buy-to-let landlords facing an existential crisis?
Sources and Further Reading
The coastal property boom: is the UK seaside market sustainable? — A look at how regional property markets are performing, with lessons for commercial landlords in coastal areas.
Smart home, smart investment: tech upgrades that boost UK property value — While focused on residential, the principles of upgrading to attract tenants apply to commercial property too.
Savills (2026). UK Cross-Sector Outlook 2026 — Commercial. 🔗
Charles Russell Speechlys (2026). UK Real Estate Sector 2026 and Beyond. 🔗
Colliers (2026). UK Real Estate Investment Forecast Q1 2026. 🔗
