The End of ‘Upward-Only’ Rent Reviews? How You Can Turn Market Disruption into an Opportunity!
This article was first published in Property Investor News, August 2025
The commercial property world has been thrown a curveball! The UK government’s surprise announcement in the English Devolution and Community Empowerment Bill to abolish upward-only rent reviews (UORRs) has sent shockwaves through the industry.
But here’s the thing about market disruptions: they create winners and losers. The winners adapt quickly and double down on what works. The losers panic or hope things will go back to how they were.
Whilst there is a long way to go with this legislation (and the property industry will undoubtedly fight it), this fundamental shift could demand a complete rethink of your whole investment strategy. But here’s the thing. Times like this can be an opportunity and make us level up and do what we (probably) should have been doing anyway!
What's Actually Changing (And Why It Matters)
This massive 338-page Bill introduces new schedules into the Landlord and Tenant Act 1954, prohibiting upward only rent reviews (UORRs) on all new business tenancies. The scope is comprehensive: open market rent reviews, index-linked increases, even turnover rents – they’ll all become upward and downward.
The government claims this helps small businesses, particularly those on the high street, but here’s the reality: the retail sector often takes shorter leases which don’t contain rent reviews anyway – ironically the retail industry is actually one of the sectors least likely to benefit from the ban.
More concerning for investors is that upwards-only rent reviews underpin why business leases are attractive to investors and lenders, providing stable guaranteed cash flow. Abolishing this practice threatens to undermine the business lease as a secure investment model.
….But here’s where the opportunity emerges for the strategically minded.
The Niching Imperative: Why "Slowing Down to Speed Up" Is Now Essential
I’ve always advocated that successful commercial property investment comes down to one principle: niching. Finding your specific area of expertise, understanding it better than anyone else, and becoming the go-to investor in that space. The UORR changes now make this absolutely critical. Why? Because in a world where rental income could now go down as well as up, the quality of your market selection, tenant covenant, and location choice becomes everything. You can’t afford to be a generalist anymore. You need to be a specialist in markets where demand will continue to grow regardless of lease structures.
Slowing down to speed up means taking time now to properly research and position yourself in the right niches before everyone else catches on. It means being selective, patient, and strategic rather than reactive. This is what I teach on my Board, and the Board clients who have spent the time to do this have found they get the very best deals and the very best rental growth from their assets.
The Four Pillars of Commercial Investing
I’ve put down my thoughts below as to how you can ‘beat the market’ with your investing in this potential new world, in 4 main sectors.
Sector 1: Supply-Constrained Growth Sectors
The golden rule of life post UORR is to only invest where structural tenant demand outpaces supply. Examples include:
Small-Scale Industrial and Logistics No sector has benefited more from structural shifts in UK consumption than logistics. Local delivery hubs, small warehouses, and industrial units under £1m are in high demand. Trade counters, small manufacturing units, and local distribution centres are averaging strong yields and strong tenant demand.
Key opportunities: Small industrial estates, trade counter units, local storage facilities, and urban logistics hubs serving growing e-commerce businesses.
Technology and Digital Services The digital transformation creates opportunities for smaller investors. Think co-working spaces, small server rooms, and tech-enabled service businesses. These smaller-scale assets often offer better yields than institutional alternatives while serving the growing SME tech sector.
Sector 2: Local Retail and Mixed-Use Opportunities
Despite broader high street decline, neighbourhood retail is proving remarkably resilient. Think corner shops with residential above, small retail parades serving local communities, and essential services locations. These opportunities often offer strong yields and serve recession-resistant local demand.
Target characteristics: Essential services (convenience stores, pharmacies, takeaways), properties with residential income, assets serving walkable neighbourhoods, and businesses with strong local customer loyalty.
Sector 3: Small Office and Professional Services
While large corporate offices struggle, small professional service providers need quality space. Solicitors, accountants, consultants, and healthcare practices often prefer smaller buildings where they can control their environment. These assets typically offer stable, professional tenants.
Target markets: Suburban office buildings (2,000-5,000 sq ft), professional service centres, medical suites, and buildings near transport links serving SME businesses.
Sector 4: Specialist SME Service-Based Property
These sectors offer structural growth drivers perfect for smaller investors. Think veterinary practices, dental surgeries, nurseries, and specialist education facilities. These properties often trade below £1m, offer strong yields (8-12%), and benefit from tenants with significant fit-out costs who are reluctant to move.
Key opportunities: Healthcare and veterinary practices, children’s nurseries, specialist education providers, and service businesses with specialized premises requirements.
Why Size Can Be an Advantage!
Smaller investors actually have advantages in the post-UORR world. You can move faster than institutions, focus on overlooked opportunities, and build personal relationships with local tenants. While large investors worry about billion-pound portfolios, you can concentrate on finding the perfect £500k industrial unit or £750k mixed-use property.
The key is to focus on assets where rental growth comes from local market dynamics, not contractual protection. A successful local business will pay market rent regardless of lease clauses. On the flip side, struggling businesses won’t pay any rent at all!
Your Niching Due Diligence Checklist
When deciding on a niche, your answers to the below questions are critically important:
- Supply constraint: Is new local supply limited by planning restrictions, land availability, or construction costs?
- Demand drivers: Are there at least three structural demand drivers that will persist regardless of economic cycles? (e.g. for neighbourhood retail – aging population; convenience culture; community gentrification)
- Tenant stickiness: Have tenants spent a lot of money on fitting out? Would they face significant costs to relocate?
- Location resilience: Will this local area benefit from demographic and economic trends over the next 10 years?
- Property condition: Does this asset meet tenant needs without requiring major capital expenditure?
- Tenant quality: Is your target tenant in a stable business with good local reputation?
- Alternative use potential: Could this property serve other local businesses or have multiple exits if the current use fails?
- Financing clarity: Can you secure appropriate financing at rates that make the investment viable into the medium term?
The Financial Reality: Pricing in the New Risk
The removal of UORRs doesn’t eliminate rental growth – it shifts where the risk lies. Smart investors will:
- Target Higher Initial Yields: Properties without UORR protection should trade at yields that compensate for additional risk. Use this as a key negotiating point.
- Consider Shorter Lease Terms: In strong local markets, shorter leases (3-5 years) can work in your favour, allowing you to capture rental growth more quickly at lease expiry.
- Build Direct Tenant Relationships: Unlike institutional investors, you can develop personal relationships with tenants, understanding their business needs and working together on mutually beneficial lease structures.
Your Action Plan!
- Portfolio and Finance Review Assess your current portfolio for UORR exposure and review your available capital and financing options for new acquisitions.
- Local Market Research Focus on your local niche or target areas. Visit properties, talk to agents, and understand what’s working for local businesses.
- Deal Sourcing Target off-market opportunities through local agents, negotiate UORR removal in the price, and build relationships with motivated sellers.
- Strategic Acquisitions Focusing on properties that offer both income and potential value enhancement.
Why This Creates Opportunity for the Strategic Investor
Market disruptions create opportunities for agile smaller investors. The UORR changes may result in institutional investors becoming more cautious, creating opportunities for SME investors who can move quickly and focus on local markets.
For investors who understand their local markets and can build tenant relationships, this represents a significant opportunity to acquire quality assets while larger players hesitate.
The potential end of the upward-only rent review mechanism isn’t the end of commercial property investment – it’s the end of lazy commercial property investment! You may no longer be able to rely on contractual rent increases to bail out poor location choices or weak tenant covenants.
This change demands a laser focus in market selection, asset quality, tenant analysis, and timing. The investors who thrive will be those who are highly strategic and embrace niching – they slow down to properly analyse opportunities and speed up to execute when they find the right deals!
Remember, in commercial property, as in life, the riches are in the niches! The proposed UORR changes haven’t changed that fundamental truth – they’ve just made it more important than ever!
