Rent Floors to Trapdoors

Columns are the author’s own opinion and do not necessarily reflect the views of Onward.

Executive Summary

The proposed abolition of upward-only rent reviews (UORRs) poses a material threat to London’s commercial property market and the UK’s wider economic credibility. UORRs are not quirks of landlord practice, but long-established mechanisms that reduce risk, stabilise rental cash flows, and support asset valuation. Empirical research has shown that their removal can cut capital values by 4-to-14 per cent across sectors. 

Applied to London’s £300 billion office and West End retail market, even a modest 25 basis point rise in yields equates to £15 billion wiped off values. At 50 bps the loss is £28 billion, and at 75 bps the destruction rises to £40 billion. Even under a conservative £180 billion base, the hit is £9-to-£24 billion.

The impact extends to the development pipeline. London has 9-to-10 million sq ft of office space under construction, half speculative. If yields widen, 2-to-3 million sq ft of projects become vulnerable to delay or cancellation as residual values collapse, IRRs fall below hurdle rates, and lenders reprice debt. The result is slower regeneration, weaker growth, and a reputational shock to Britain’s investability at precisely the moment global bond markets are looking for policy coherence. 

1. A Clause in the Crosshairs

The Second Reading of the English Devolution and Community Empowerment Bill has placed one of the least understood but most important clauses in commercial property at the centre of political theatre: the upward only rent review (UORR). 

Former Secretary of State Angela Rayner told the Commons that the measure would end an “unfair practice”. Labour’s Alison Taylor MP, by contrast, reminded the House that even the Church Commissioners have relied on these clauses to guarantee stable income streams.¹ 

The politics of siding with small businesses is clear. The economics are not. Abolishing UORRs would destabilise rental income, undermine asset values, and signal to investors that Britain is willing to rewrite contracts at will. For a government that insists it wants to be the global destination for capital, this is incoherence in its purest form.

2. The Economic Role of UORRs

For more than three decades, the evidence has been clear: UORRs support investment. By fixing a rent floor, they reduce risk, compress yields, and underpin valuations. Remove them and the consequences are immediate. Cost of capital rises, values fall, debt becomes more expensive, and development feasibility – crucial for regeneration and refurbishment – is demonstrably weakened.

This is not theoretical. Empirical research in the 1990s showed that banning UORRs could reduce capital values by up to 13 to 14 per cent in some sectors, with a weighted average fall of around 4.3 per cent across offices, retail, and industrial property.² Later surveys confirmed the point: valuers saw UORR abolition as a direct drag on values, and lenders considered them essential for securing debt finance.³ 

Applied to London’s prime office and West End retail markets today, the impact is stark. On a £300 billion asset base, even a modest 25 basis point rise in yields wipes out £15 billion of value. A 50 bps move means £28 billion gone, and 75 bps equates to £40 billion destroyed. Even the cautious scenario, using a £180 billion base, puts the loss at £9-to-£24 billion. These are not academic estimates but direct consequences of how income producing assets are priced, consistent with decades of research.

The damage does not stop with standing assets. London has 9-to-10 million sq ft of offices under construction, with approximately half being speculative. A yield shift of 25-50 bps makes 2-to-3 million sq ft of that pipeline vulnerable to delay or cancellation. Residual land values fall by tens of millions per scheme, returns dip below investment committee hurdles, and lenders reprice debt without the comfort of rent floors. The result is fewer towers, slower regeneration, and weaker economic growth.

Legal practitioners echo the consensus. Linklaters and Browne Jacobson have consistently described UORRs as the cornerstone of cash-flow predictability. A government-commissioned review in 2011 went further, warning that legislation against UORRs could have “major negative impacts on the property market”.⁴

When ministers claim otherwise, they are not presenting an alternative analysis. They are disregarding decades of evidence. 

3. Lessons from the 1990s

This debate is not new. In 1992, Professor John Burton wrote for the Adam Smith Institute urging for the abolition of UORRs on competition grounds. His intervention prompted a government consultation and even inspired a Ten-Minute Rule Bill in Parliament. 

Yet ministers resisted. Tony Baldry MP, then Parliamentary Under-Secretary, told the House that statutory abolition would damage investment and that lease terms should remain a matter of freedom of contract.⁵ Instead, in 1995 the government introduced a voluntary Code of Practice encouraging alternatives such as indexation or up-and-down reviews.

The lesson then was clear. Even in recessionary conditions, Britain could not afford to sacrifice contract certainty. That remains true today.

4. NEFs Long Shadow

So why has this proposal resurfaced?

The intellectual foundation for the ban can be traced to the New Economics Foundation (NEF). In its 2005 report Clone Town Britain, NEF labelled UORRS “unfair” and demanded they be prohibited or tempered with tenant break clauses.⁶ The argument was that fixed rents favoured chains over independents, driving homogenization of high streets.

Yet the context then was telling. In 2005 retail sales were growing, footfall was robust, and online shopping accounted for only 2 per cent of total retail sales.⁷ The problem was not rent reviews but consumer preferences and planning policy.

Two decades later the diagnosis looks even more outdated. Rents have fallen markedly since the global financial crisis and again since Covid. But independents have not returned. Footfall has collapsed and online penetration has surged above 25 per cent. Cheaper rents have not solved the problem because the constraint is demand – not lease design.

The political relevance of NEF today is profound. Miataa Fahnbulleh, NEF’s Chief Executive from 2017 to 2023, is now Parliamentary Under-Secretary at MHCLG under Steve Reed. She is also touted as a potential Deputy Leader. The intellectual DNA of NEF’s call to abolish UORRs now sits inside the government. For investors, the message is simple: policy ideas incubated in left-wing anti-capitalist think tanks do not disappear. They resurface decades later with legislative force.

5. The Real Source of Retail Strain

The government frames the UORR ban as a cure for high street decline. Industry data says otherwise:

• The British Retail Consortium reports footfall across UK high streets fell by 2.2 per cent in 2024 and by 2.5 per cent over the critical Christmas quarter⁸

• The Office of National Statistics shows non-store sales volumes are at their highest level since early 2022⁹

• The High Streets Task Force confirms that visits remain well below pre-pandemic levels¹⁰

These are structural shifts in consumer behaviour and how people shop. They will not be reversed by tinkering with lease mechanics. Even generous rent relief fails to solve the problem. Westminster Council’s “Fairer Economy” programme offered rent-free and discounted business rates on Oxford Street. 

Yet the spaces were filled mainly by novelty candy shops, not diverse independents.¹¹ Lower rents and statutory costs alone could not conjure demand. It did not deliver the diversity policymakers craved because the binding constraint is demand viability for end uses.

To claim banning UORRs will restore high streets is to misdiagnose the disease. 

6. Political Contradictions

Here lies the deeper contradiction. 

On the one hand, ministers insist Britain must be the destination for global capital. Steve Reed chants  “build baby build”. On the other, the same government is dismantling the contractual framework that makes office and mixed-use schemes fundable. 

Investors will not commit billions where income streams are politically volatile. Sovereign wealth funds, insurers and pension funds prize certainty above all else. Banning UORRs while pleading for inward investment is not reform. It is incoherence. 

And the bond market is watching. After years of volatility, international investors demand policy coherence. The UORR ban cuts directly against Labour’s stated ambition to restore fiscal credibility. 

7. Conclusion

For all the rhetoric, a climb-down is inevitable. Either the measure will be diluted down in committee or carve-outs will be introduced. If not, the market will enforce discipline. Yields will rise, debt will cost more, and fewer projects will proceed. The effect will be the opposite of the government’s stated aim. 

Britain’s global standing has long rested on contract certainty. Sacrificing that reputation for political theatre is an act of self-harm. Burton opened this debate in 1992. Baum mapped its economics in 1995. Thirty years on the verdict is unchanged. UORRs support investment. Abolishing them damages it. 

Labour dresses up a reckless attack on contract certainty as high-street salvation. Investors are not fooled, and neither are the bond markets. As Kemi Badenoch reminded us, Britain must live within its means. That requires policy coherence, not political theatre. This ban is incoherent. It is not fairness – it is folly. 

Labour chants “build baby build” while torching the very contracts that make building possible. This is sabotage masquerading as policy. And if they press ahead, the wrecking ball will not just fall on developers, but on Britain’s credibility, leaving the country poorer, weaker, and uninvestable.

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1. Hansard, HC Deb 2 September 2025, vol. 772, cols. — (Debate on the English Devolution and Community Empowerment Bill, Second Reading—Statutory prohibition of upward-only rent reviews discussed). link ↩︎
2. Andrew Baum, Neil Crosby, Simon Murdoch, The Contribution of Upward-Only Rent Reviews to the Capital Value of UK Commercial Property (University of Reading, 1995). The study estimated capital value reductions of up to 13–14 per cent in some sectors if UORRs were abolished, with a weighted average fall of around 4.3 per cent. link ↩︎
3. Matthew Scrimshaw, “The effect of upward-only rent reviews on UK prime retail property capital values,” Journal of Property Investment & Finance 25, no.6 (2007); Maxted & Porter, survey of lenders, cited in Cheetham (2011) link ↩︎
4. Cheetham, Government-commissioned review of rent review mechanisms, 2011, concluding that legislation against UORRs could have “major negative impacts on the property market.” link ↩︎
5. Hansard, HC Deb 10 November 1992, vol. 213, cols. 865-873. Tony Baldry MP resisted statutory abolition, warning of the risk to investment. link ↩︎
6. New Economics Foundation, Clone Town Britain (2005), which called for prohibition of UORRs or mandatory tenant break clauses. link ↩︎
7. Mintel, Europe Online Retailing (2005), reporting online sales at only 2 per cent of total retail that year. link ↩︎
8. British Retail Consortium, Footfall Monitor 2025, reporting 2.2 per cent annual decline in 2024 and 2.5 per cent fall during the golden quarter. link ↩︎
9. Office for National Statistics, Retail Sales Index, June and July 2025, reporting non-store sales volumes at their highest since February 2022 link ↩︎
10. High Streets Task Force, Footfall Tracker 2024-25. ↩︎
11. Forbes, “Rent-free stores on Oxford Street part of once-in-a-lifetime regeneration” (19 July 2023), noting that Westminster’s rent-free pilot was largely taken up by novelty operators link ↩︎